Secured Notes Procedures

When you have identified a secured note investment, you will need to follow specific steps and provide the necessary forms and documentation to complete the transaction.

General guidelines

  • Use the PENSCO Secured Note Investment Kit to make a secured note investment in your IRA. You must read, approve, and sign all documents before sending them to PENSCO Trust Company for the custodial signature. PENSCO will then return the signed documents, along with the funds, to the identified escrow agent for closing.
  • All documents must be vested:
    • For IRAs: PENSCO Trust Company Custodian F.B.O. + [Accountholder name] + IRA
    • For Solo(k)s: PENSCO Trust Company Custodian of [Plan name] F.B.O. + [Accountholder name]
  • Depending on the type of collateral you use to secure the note, you may also need the Private Investment Submission Guidelines (part of the Private Investment Kit).

Required documentation for a secured note to an individual

You will need to complete and sign three forms before we can fund the note investment, plus provide a copy of specific documents based on the collateral type. Refer to the table in the Secured Note Checklist (part of the Kit) to ensure that you are providing the appropriate documentation for an investment secured by the respective collateral.

  1. IRA Secured Note Authorization

    This form authorizes PENSCO to fund the note from your self-directed account.

  2. PENSCO Note Servicing Agreement

    PENSCO does not service any loans or notes. You are (or your loan servicer is) responsible for handling the recording of the asset, collections, defaults, foreclosures, etc. Both the accountholder and the loan servicer must sign the PENSCO Note Servicing Agreement. We cannot accept a third-party loan servicing agreement if PENSCO is the custodian of the note. If you are using a loan servicer who insists on using its own servicing agreement, both the servicer's loan servicing agreement and PENSCO's Note Servicing Agreement are required.

  3. Investment Funding Instructions

    Complete the PENSCO Investment Funding Instructions form in its entirety. Please ensure that you have sufficient funds in your account to meet our $500 minimum cash balance requirement as well as any associated transactional fees. (See current Fee Schedule). We may need to delay processing your transaction if your account does not have sufficient funds.

Required documentation for a secured note to a business entity

Loans to business entities require additional documentation to help protect your retirement assets from potential fraudulent activities or prohibited transactions.

For a secured note to a business entity, we need to receive the items above, plus the following:

  1. Documents identifying the beneficial ownership of the entity

    Operating agreement for LLC / Partnership agreement for LP / List of shareholders for C-Corp to ensure the entity has valid governance and that a loan will not benefit a disqualified person (as defined by IRS code).

  2. Evidence that the entity is duly formed and in good standing

    A Certificate of Good Standing from the Secretary of State or printout from the Secretary of State website of the entity's state of domicile.

Timing for funding the note

Once PENSCO Trust Company receives all of the conforming documents, please allow:

  • Three to 10 business days for our administrative review for a loan to a business entity
  • Two business days for a loan to an individual

Required documentation after funding

You will need to submit additional documentation to PENSCO Trust Company after the note has been funded:

  1. Secured note
    • If there is a broker/advisor/third-party loan servicer, the servicer is responsible for preparing, recording, and holding the original deed of trust/mortgage in safekeeping, as well as for providing PENSCO with a final copy.
    • If you are servicing the note yourself, you are responsible for preparing and recording the deed of trust/mortgage, as well as for sending PENSCO the original secured note for safekeeping. PENSCO's address must be used as the return address for the county recorder's office on the deed.
  2. Copy of the of the escrow agreement (if applicable)
  3. Payment/amortization schedule

    Note: When an original, signed form is required, it must be mailed to PENSCO Trust Company for processing. However, you may fax or email most other investment-related documents.

See Contact Us for mail and fax information.

Note: All documents and forms can be emailed to realestate@pensco.com.