The exciting part of a self-directed promissory note investment is that you get to negotiate all loan terms including, but not limited to: loan amount, initial payment date, maturity date, interest rate and payment or amortization schedule. Once you have the terms set, you will want to use the following guidelines to ensure timely funding of your promissory note.
The first step in funding this transaction is to make sure you have the vesting for the lender correct on the documents. NOTE: Remember, it is not you personally loaning the money and since it’s your IRA that is loaning the money it will need to be vested in the name of the IRA to hold the asset. Thus, all documents must be registered as:
Quest Trust Company Inc., FBO (Your Name) IRA (Your Account Number)
You will also need to submit Quest Trust Company’s internal form (Direction of Investment), along with the promissory note, before we can generate a check or wire for the funding of the promissory note. Please make sure all the necessary fields are completed on the Direction of Investment form for timely funding.
When the lenders tax ID or physical address is required on lending documents, please make sure that you use Quest Trust Company’s information:
Tax ID: 61-1435085
Address: 17171 Park Row Ste 100 Houston TX 77077
It is up to the client to determine if the interest rate on your promissory note complies with the applicable state laws, such as usury laws in Texas.
Quest Trust Company does not provide tax, legal or investment advice and thus we cannot provide any legal documents for the creations and/or funding of your promissory note. This will be the responsibility of the client to ensure the correct corresponding states legal documents are used in creation of the promissory note.
How to service the promissory note? Quest Trust Company is not a loan servicer. Clients do have a few options for ensuring payments get deposited into your IRA account. NOTE: Quest Trust Company does accept cash. Payments or deposits must be made by check, money order or ACH Funds. Payments can be sent directly to Quest Trust Company from the borrower and once deposited the client can monitor those payments with online access to their IRA account. The client may also have the borrower make check payments out to Quest Trust Company FBO your account and hand those to you but, this will make you responsible for forwarding any payments to Quest Trust Company – NOTE: Please keep in mind NO PAYMENTS can ever hit your personal checking account. All payments must be forwarded to be deposited. Lastly, the client can also elect to get a third party servicing agent. They will then have the responsibility to collect the payments checks for your IRA and forward all payments to Quest Trust Company.
Items Needed for Funding Unsecured Notes:
1- Direction of investment for notes
2- Original signed promissory Note ( the original does have to be in the office before funding can take place)
Items Needed for Funding Secured Notes:
1- Direction of Investment for notes
2- Promissory Notes
3- Security agreement ( IE Deed of Trust)
** If the transaction is closing at a third party agent like a title company or attorney office Quest Trust Company can accept unsigned copies of the note and deed of trust for funding. If there is not a third party involved then Quest Trust Company would need the original note and a copy of the signed deed of trust before funding. Quest Trust Company will also need to know who will be responsible for recording of the deed of trust.
Items Needed for Funding Existing Note:
1- Direction of Investment for notes
2- Original deed of trust and Promissory note
3- Copy of the allonge and transfer of lien. Both of these items will put the note and deed of trust into the name of your IRA.
What to know after funding of your promissory note with Quest:
All original legal documents, the promissory note and recorded deed of trust, need to be mailed to Quest Trust Company, Inc. at the following location:
17171 Park Row, Suite 100 Park Row – Houston TX 77077
The documents will be kept in a fire proof safe in Houston before being shipped for final safe keeping to our custodian which is Mainstar Trust located in Kansas.
Fair Market Value of your investment will be requested for every calendar year you are a client. Clients will be sent the FMV form to complete and then should return the form by fax, email and/or mail.
Maturity dates must to be kept current on all promissory notes. If your promissory note has expired, and Quest Trust Company has not received notification and/or documentation that you are going to modify or extend the promissory note with your borrower, Quest Trust Company will be forced to distribute the asset to you. The distribution may cause a penalty and/or tax burden that must be paid by the client.
Payoffs – When the borrower is ready to payoff the promissory note the client will need to fill out a sell direction and/or payoff letter for Quest Trust Company’s records. If is the responsibility of the client to calculate the payoff and interest due for the borrower, as Quest Trust Company, who acts as the third party administrator of the IRA account, does not calculate the payoff amount. If the promissory note is payoff is processed at a title company they will most likely request a payoff letter and/or verification of mortgage (VOM). The client will need to complete the title company forms and then send Quest Trust Company to us for final signature.