Deed of Trust


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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)

References in periodicals archive ?
Similarly, the District of Columbia Court of Appeals held that a condominium association's foreclosure on a condominium for unpaid dues extinguished the first mortgager's deed of trust. (76) The District of Columbia has a condominium act that provides for a six-month priority lien for the association.
To date, every state supreme court that has looked at the issue has concluded that, despite its boilerplate language, MERS is not a mortgagee or deed of trust beneficiary.
The locally controlled nature of education in the Ottoman Empire allowed the various educational entities, mektep, muallimhane, etc., to set their own enrollment policies within the bounds of an institutions deed of trust. However, there is no information about students' ages at Darulhuffaz of Nasuh Bey in its deed of trust.
Its Deed of Trust was signed in 1950 and the residential home set up to provide continuing care, short term stays and day facilities.
The land contract is being rapidly replaced by a deed of trust. In this situation the deed is literally held by a third party which accepts payments on the seller's behalf.
Collateral is a mortgage secured by a promissory note and deed of trust In effect, the investors are direct lenders of a specific loan.
On April 13, 1989, when the government finally shut Keating down, one of the things they found in his vault was the deed of trust to Falwell's Thomas Road Baptist Church.
On May 18, Evans informed Ononuju that it had been appointed substitute trustee on the deed of trust securing the promissory note, and that the VHDA had bought his home at a foreclosure sale.
Hershey Trust Company is the Trustee of the Milton Hershey School Trust, which under Milton and Catherine Hershey's 1909 Deed of Trust funds the Milton Hershey School.
The city's obligation under the trust agreement is secured by a deed of trust from the city to the trustee, granting a first lien on the mortgaged property.
Tenders are invited for to provide, prior to its sale, notice to any person who holds a publicly recorded deed of trust, mortgage, lease, lien or other claim on any property subject to sale at the 2018 tax certificate sale of real estate.
Then, on 17 January 2017, the full Deed of Reconveyance releasing the Deed of Trust on the acquired property was recorded and the company is now in full ownership and has no further liability with respect to this acquisition.