Legal Question in Real Estate Law in California

This is a mortgage, or a note secured by a deed of trust. The borrower and the lender enter an agreement to lend/borrow the money on terms, including payback times and interest charged, if any, and terms to employ in case of a default. The interest rate should not be more that the legal rate, because only institutions can charge usurious, pillaging interest as we've seen over the last six years or so, leading to the mortgage debacle.

If the note is illegal on any point it becomes unenforceable, and therefore worthless. There may still be remedies however, including a law suit for collection. It's best to have an attorney provide you with a note secured by a deed of trust because of the complexity of the document, and it's relationship with real property, mortgage laws, local laws and the government. If the note is recorded, it holds its position against all other creditors who come along subsequently. The lender usually is responsible for getting the papers together and recording the note and deed of trust.

In your situation, you would prepare, sign and record a note and Trust Deed in his favor. He should make sure it is done right, by having it prepared by a title or escrow company, or an attorney.

The usual way in California to put up real estate as collateral for a loan is to use a promissory note and deed of trust, then record the deed of trust. The forms can be obtained from legal stationers, an escrow company, or on line (from a title and escrow company's web site, for example). The papers need to be filled out very carefully, and competent advice is strongly recommended.