In the context of real estate, a deed of trust declares the transfer of a specific financial interest on a piece of property to a trustee.
This functions as a form of security for a loan involving two other entities. In such a relationship, one entity is known as a beneficiary while the other is called a trustor. The beneficiary is the entity who lends the money, while the trustor is the person who receives it.
The deed of trust contains information on the original amount loaned, as well as a description of the property. The inception and maturity date of the loan is also included. In addition to these details, other provisions governing the mortgage, information on late fees and clauses are also detailed in the deed.
The deed of trust is placed on the record of the appropriate authority for the territory in which the property is located.
Once the debt has been repaid, the monetary title claim is then transferred to the debtor in a process known as reconveyance. This serves as a release from the debt obligation.
Should the debtor be unable to repay the loan, the trustee has the prerogative to move for a foreclosure and have the title transferred to the lender. Another solution could be to sell the property and use the funds from the sale to repay the lender.
Trust deeds are not publicly traded. They are not mortgage-backed, either. They are simply used to facilitate real estate purchase financing, and are more commonly used in some states. They may also be used for loans of a different nature, but which make use of real estate as collateral. Deeds of trust may also function to secure the performance of some contracts which do not necessarily have anything to do with loans.
