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What is a real estate Deed of Trust and what is its purpose?

Deed of Trust is a legal document wherein the financial interest in the title to a real property is held by a trustee until the mortgage loan is paid back. When the loan is fully repaid, the title is transferred to the trustor or borrower. However, if the borrower defaults on loan, then the trustee has every right to foreclose on your property.

Deed of Trust parties

A Deed of Trust involves 3 parties as described below.

  • The trustor or the borrower, who takes out a mortgage loan.
  • The beneficiary or the lender, who offers the mortgage loan.
  • The trustee, who is an entity that holds the title until the home loan is repaid.

Purpose of a Deed of Trust

A Deed of Trust serves as the security for your loan. The borrower has nothing to worry about as long as he/she continues making the agreed upon payments. However, the provisions of the deed become operative if the borrower defaults on making the necessary payments; this is when the lender possesses legal right to carry out foreclosure proceedings on the property.

Role of a trustee

A trustee is usually a title company that holds the title of the property and also possesses the right to sale it in the event of loan default. It is also the task of the trustee to transfer the title when the entire loan amount is repaid. When a borrower defaults on loan, the trustee files a Notice of Default. The trustee has the right to sell the property after the required notice period, which is 90 day period in public records and 21 day publication period in newspaper. The borrower can redeem the property by making the necessary payments (trustee’s fees and the back payments). However, the borrower cannot claim the property once the trustee sells it at a trustee’s sale.

Required information for the deed

A Deed of Trust requires the following information in order to make it valid.

  • Name of the trustor (borrower)
  • Name of the beneficiary (lender)
  • Name of the trustee
  • Date in which the deed is signed
  • Name of the County where the County Recorder’s office is situated
  • Name of the State where the County Recorder’s office is situated
  • Description of the property

What a Deed of Trust conveys

A deed of Trust states the following.

  • The original loan amount
  • The parties involved in the transaction
  • Legal description of the property that is used for securing the mortgage loan
  • Provisions of the mortgage and its requirements
  • The date of loan maturity and inception
  • Legal procedures
  • Late fees
  • Alienation and acceleration clauses
  • Riders, such as, prepayment penalties or terms of an ARM (Adjustable Rate Mortgage)

It is better to take the help of an attorney in order to fill out a Deed of Trust agreement. He/she can offer guidance on how to fill out the agreement with appropriate information.