Deed of Trust
Frequently Asked Questions
Who Is the Trustee in a Deed of Trust?
Unlike a mortgage that requires only two parties, a Deed of Trust requires three parties. A Deed of Trust conveys the interest of a property to a third party, who is designated as the trustee. This person holds the title as security for the loan and must hold that title for the duration of the loan term on behalf of the borrower and lender. There are not typically restrictions as to who can be the trustee; however, this person must not be personally affiliated with the lender or borrower. This is because the trustee must remain a neutral party and never show bias to either party. Many people choose to have a title company serve as trustee, but an individual, group or business can serve this role as well.
Where to Get a Deed of Trust?
To get a Deed of Trust, you must file the proper paperwork with the proper court as generally outlined above. These documents must be filed with the county clerk or recorder, and the lender typically sends them to the recording office after the property closing. In most circumstances, the lender will provide the borrower with a copy of the Deed of Trust, while the originals are mailed to the grantee after recording.
Many county clerk and recorder offices will provide copies of this document for a small search and print fee. Alternatively, mortgage lenders may have copies of Deeds of Trust if you need them.
How Does a Deed of Trust Work?
A Deed of Trust works by establishing a formal and legal written agreement to place a property in the hands of an impartial third party, who holds the property until the borrower’s debt is paid. The borrower retains the property title during this time and has responsibility for the property unless otherwise specified in the legal documents.
Deeds of Trust differ from mortgages because they involve a neutral third party during a period of satisfying debt. In most states, foreclosure sale under a Deed of Trust requires a less strict legal process if the borrower defaults. The trustee is responsible for distributing funds between the lender and borrower upon completion of the sale.
What’s the Difference between a Deed of Trust and a Title?
A Deed of Trust and a title are both important real estate documents, but the title establishes ownership rights and conveys the transferring of property ownership from one party to another. Deeds of Trust do not prove ownership, but instead are used to secure home loans as a mortgage alternative.
A Deed of Trust should not be confused with a basic Deed, which is a separate document that can transfer the title from one person to another.
The process of setting up a Deed of Trust varies from one state to another, which is why it’s a good idea to work with a trusted legal document preparer, like We the People, that knows the laws where you live.
What’s the Difference between a Deed of Trust and a Mortgage?
Deeds of Trust are often used when people use alternative lenders that are not banks to buy property. Deeds of Trust function in a similar way to a mortgage but have distinct differences. For example, a mortgage only involves the borrower and lender, while a Deed of Trust involves a third-party trustee, who holds the property title until the loan is repaid.
If a borrower defaults on payments with a mortgage, the lender files a lawsuit, the property goes through a judicial foreclosure process, and the property sale goes through the court system. But with a Deed of Trust, his court process is often bypassed in favor of non-judicial foreclosure, which can be a quicker and more affordable way to handle the issue.
If you are going to be filing a Deed of Trust or need help completing Deed of Trust paperwork, contact We the People today.
Visit our store locations to find an office near you.
Make an appointment today.