The purpose of this brochure is to provide basic information which you should know if you plan to purchase existing promissory notes or fund loans, the repayment of which is secured by deeds of trust recorded against California real property. The funding of a loan or the purchase of a promissory note is an investment which involves some risk. Prior to becoming a lender of loans or a purchaser of promissory notes, you should be able to answer the following questions:

1. What is a “promissory note?” A promissory note is a written promise to pay or repay a certain amount of money at a certain time, or in a certain number of installments, or on demand to a named person. It usually provides for payment of interest, and its payment can be secured by a deed of trust.

The person receiving the loan proceeds (borrower) becomes obligated to repay the debt by signing a promissory note which specifies: (1) the amount of the loan (principal); (2) the interest rate (interest); (3) the amount and frequency of payments (debt service); (4) when the borrower must repay the principal (due date); and (5) the penalties imposed if the borrower fails to timely pay or tender a payment (late charge) or decides to pay a portion or all of the principal prior to the due date (prepayment penalty). The promissory note identifies the borrower and the person who will receive the payments (lender or note holder).