The Quick Facts on a Deed of Trust
A deed of trust is a written legal document that is commonly used in real estate. A trust deed essentially is a record of debt, in which the title of property is transferred to a third party to hold until the loan amount is paid off in full. A trust deed will also function as the document of title in terms of public record.
Trust deeds are similar to mortgages in the fact that there is a borrower and lending party. Most states will tend to use the mortgage system for financing homes, though California, for example, will often times use a deed of trust. The main difference between a mortgage and a deed of trust is that there will be a third party involved, often times a title company.
The title company is in charge of securing and keeping the trust deed as security for the lending party or company. Once the mortgage or loan is paid in full, the title company will then release the trust deed to the purchaser, and thus, also the title of owner ship of the property. Even though trusts deeds will be in the possession of the trust company, the actual title will still belong to the purchaser, as long as the payments are being made as required and the loan is not in default. The trust company will usually be a silent third party, only taking necessary action when there is a default in the loan.
The trust company will be in charge of notifying the borrower regarding the back payments, which are to be made in full. If the notifications will not produce repayment, the lender will then have the authority to sell the property in order to pay off the loan.