The questions below cover the operational decisions a new seller-carry holder makes in the first 60 days after closing. The answers point to the records and disciplines a note buyer or state examiner reviews at month six and beyond.

Recording and document custody

Question one — How do I confirm the deed of trust recorded?

Pull the recorded document from the county recorder or ask the title agent for a recorded copy with the document number and recording date. Confirm within five business days of closing.

Question two — Who holds the original promissory note?

The seller holds the original note in physical possession or with a designated custodian — a bank vault, a document custodian, or a licensed servicer. A lost original note is a problem at resale and at foreclosure.

Borrower onboarding

Question three — What goes into the borrower welcome package?

Payment instructions or portal credentials, trust account remittance information, billing-questions contact, hardship contact, schedule of authorized late fees, privacy notice, electronic communications consent, and a copy of the executed note and security instrument.

Question four — When does the package go out?

Within seven days of closing, with a tracking number or electronic delivery receipt retained in the loan file.

Trust account setup

Question five — When does the trust account open?

Before the first payment is due. A trust account opened after the first payment lands has already received commingled funds in the prior account.

Question six — How is the account titled?

As a trust account, with a name that identifies the trust purpose — “[Holder Name] — Borrower Trust Account” or the state-specific format. The bank product agreement documents the trust nature.

Verification and analysis

Question seven — What does the day-30 verification cover?

The property tax amount, due date, and parcel identification — confirmed with the county assessor. The insurance policy in force, premium amount, and renewal date — confirmed with the insurance carrier. Both records go into the loan file.

Question eight — What does the day-45 escrow analysis cover?

Projected next-twelve-months disbursements, monthly escrow deposit, §1024.17 cushion, shortage or surplus identification, borrower notice of any payment adjustment, updated loan-file records.

First reporting cycle

Question nine — What does the first month-end report include?

Borrower statement, three-way trust reconciliation, borrower sub-ledger trial balance, holder’s general ledger interest and principal accruals.

Question ten — How does month-end feed year-end?

Twelve clean month-ends produce a defensible IRS Form 1098 in January. The first month-end establishes the records the remaining eleven follow.

Handoff and engagement

Question eleven — When is the cleanest handoff window to a licensed servicer?

The closing table is the cleanest window. The early-week mark, the one-month mark, and the two-month mark are progressively heavier boarding workflows. After day 60, the handoff becomes a records-reconstruction project.

Question twelve — What is the single best early-stage investment?

Engaging a licensed servicer at the closing table. The first 60 days become a boarding workflow rather than a do-it-yourself project, and the records produced match what a buyer or examiner asks for at resale.

Frequently Asked Questions

What is the cheapest answer to all twelve questions?

A licensed-servicer engagement at closing. The engagement produces every record the questions ask for as a byproduct of the operating model.

When should I bring in legal counsel?

Before the closing if the seller-carry structure triggers state licensing or registration requirements, before the welcome package goes out on a borrower-specific disclosure question, and before any payment dispute opens. Consult qualified legal counsel on state-specific rules in every state where the borrower lives or the property sits.

Does any state require a third-party servicer on a seller-carried note?

Several states require licensed servicing where the holder meets activity thresholds. Several states exempt single-note holders from the licensing requirement but not from the fiduciary obligations. The state-by-state rule set varies; review the requirements in every state where the holder operates.

Sources

• Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §2601 et seq. Cornell Legal Information Institute.
• Regulation X, 12 C.F.R. §§1024.17, 1024.33, 1024.38. Consumer Financial Protection Bureau.
• IRS Form 1098 Instructions. Internal Revenue Service.
• California Financing Law, Cal. Fin. Code §22000 et seq. California Department of Financial Protection and Innovation.
• 3 NYCRR Part 419. New York Department of Financial Services.
• Texas Administrative Code, 7 TAC Chapter 80. Texas Department of Savings and Mortgage Lending.

Related Topics

• The First 60 Days of a New Seller Carry
• Trust Accounting for Seller-Carried Notes
• The Seller Carry Holder’s Year-End Tax Checklist
• Why Self-Servicing a Seller Carry Is the Most Expensive Mistake
• Impound and Escrow Account Basics for Private Mortgage Lenders
• Trust Account Reconciliation Essentials for Note Servicers