Mortgage loan deed of trust

[NotEasy]

Client lends a small personal loan to his relative to buy a house as down payment. They did a deed of trust and have it notarized already.

Question: Does the deed of trust of the mortgage loan have to be recorded in the County's Recorder office in order for the mortgage interest to be tax deductible?

[ED SMITH]

It can't be both a mortgage and a deed of trust. It is one or the other. If the holder of the deed wants to be able to foreclose without going through a court procedure, then it has to be recorded. In some states it is legally required to be recorded.

A mortgage holder, no matter what, has to go through a court procedure to foreclose.

Her in CA, almost everything is a deed.

[NotEasy]

It can't be both a mortgage and a deed of trust.

Sorry, you lost me there.

What happened is that someone got a mortgage loan from a relative as down payment for his house. They did a "Promissory note" and a "Deed of Trust and Assignment of Rents" and have it notarized already. Are you saying that it is incorrect to do a "Deed of Trust"?

And my question is not really about possible foreclosure in the future. I just want to know whether the mortgage interest paid by the borrower is still deductible or not if the lender doesn't take the Deed of Trust to record.

Thank you for your help.

[Burke]

The mortgage interest is deductible if it is secured by the property; it may not be legally enforceable if it is not recorded at the courthouse and attached to the deed. In my state, a deed of trust has to be recorded. I would definitely record it to protect the lender's interest, not only in the case of foreclosure, but loss by involuntary conversion, i.e, flood, earthquake, destruction, etc.