Deed of Trust

A document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower's land to a neutral third party, a trustee, to secure the payment of a debt by the borrower.

A deed of trust, also called a trust deed or a Potomac Mortgage, is used in some states in place of a mortgage, a transfer of interest in land by a mortgagor-borrower to a mortgagee-lender to secure the payment of the borrower's debt. Although a deed of trust serves the same purpose as a type of security, it differs from a mortgage. A deed of trust is an arrangement among three parties: the borrower, the lender, and an impartial trustee. In exchange for a loan of money from the lender, the borrower places legal title to real property in the hands of the trustee who holds it for the benefit of the lender, named in the deed as the beneficiary. The borrower retains equitable title to, and possession of, the property.

The terms of the deed provide that the transfer of legal title to the trustee will be void on the timely payment of the debt. If the borrower defaults in the payment of the debt, the trustee is empowered by the deed to sell the property and pay the lender the proceeds to satisfy the debt. Any surplus will be returned to the borrower.

The right of the trustee to sell the premises is called foreclosure by power of sale. It differs in several respects from the power of a mortgagee to sell mortgaged property upon default, which is called a judicial foreclosure. A foreclosure by power of sale is neither supervised nor confirmed by a court, unlike a judicial foreclosure. While the rights received by a purchaser at a foreclosure by power of sale are the same as those obtained at a judicial foreclosure, there is a practical difference. Since the sale has not been judicially approved, there is a greater possibility of litigation over title, thereby making title to the purchased premises less secure than one purchased at a judicial foreclosure. In addition, the lender may purchase the property for sale under the provisions of a deed of trust, since the neutral trustee conducts the sale. This is not the case in a foreclosure, unless contract or statute provides otherwise, since the mortgagee must act impartially in selling the property to satisfy the debt. Some mortgages may, however, provide for foreclosure by power of sale.

The procedure for a foreclosure by power of sale is regulated by statute, a characteristic shared by a judicial foreclosure. All interested parties must be given notice of the sale, which must be published in local newspapers, usually in the public notice columns, for a certain period of time as required by statute. The sale is usually open to the public to ensure that the property will be sold at its fair market value.

deed of trust

n. a document which pledges real property to secure a loan, used instead of a mortgage in Alaska, Arizona, California, Colorado, Georgia, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, and West Virginia. The property is deeded by the title holder (trustor) to a trustee (often a title or escrow company) which holds the title in trust for the beneficiary (the lender of the money). When the loan is fully paid, the trustor requests the trustee to return the title by reconveyance. If the loan becomes delinquent the beneficiary can file a notice of default and, if the loan is not brought current, can demand that the trustee begin foreclosure on the property so that the beneficiary may either be paid or obtain title. (See: mortgage, reconveyance, foreclosure)

deed of trust

Deed of trust

See: Indenture

Indenture

A contract for a bond. An indenture sets the terms of the bond; for example, it includes the coupon rate, the period until maturity, and whether the bond comes with any special features like convertibility or whether it is callable. All bonds must have an indenture. Indentures are usually summarized in a bond's prospectus.

Trust Deed

1. In real estate, an agreement in which the title to the property is held in a trust until the mortgage is paid. A trust deed is not given to the homeowner in order to provide an extra amount of security for the lender; the trustee for a trust deed does nothing except in the event of default, in which case the trustee sells the real estate.

2. An agreement stating the terms of a trust. A trust deed is most common when mutual funds are held in trust, and outlines the responsibilities and restrictions on the fund.

deed of trust

A security instrument used to grant rights in real property to a lender. It is used in some states; other states use mortgages to accomplish the same goal.With a deed of trust, title to the property is transferred to a trustee,who holds it in trust for the borrower's benefit until such time as the loan has been paid in full. At that time, the trustee will transfer legal title back to the borrower by way of a deed of reconveyance.If there is a default and foreclosure,it is the trustee who conveys the property to another.

deed of trust

Deed of Trust

Deed of Trust

deed of trust

deed of trust

Deed of trust

Indenture

Trust Deed

deed of trust

deed of trust

Synonyms for deed of trust

noun a written instrument legally conveying property to a trustee often used to secure an obligation such as a mortgage or promissory note

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