Deed of Trust
A deed of trust is similar to a mortgage in that it is used to provide the lender security interest in the property. The primary difference between these two legal instruments is with a mortgage, the buyer holds legal title to the property and the lender holds a property lien until the mortgage is paid in full. With a deed of trust, the lender holds the title to the property.
Some states use a deed of trust instead of a mortgage to secure property. Trust deeds involve three parties including the Borrower, Lender, and Trustee. The lender provides a loan to the borrower to purchase real estate. The borrower assigns the lender as the beneficiary on the legal title and the trustee holds the title until the mortgage note is repaid
A deed of trust includes terms stating the Trustee cannot sell the property as long as payments are made in a timely fashion. However, if the borrower defaults on their loan, the trustee has the right to sell the property and pay off the balance of the note. This is known as a 'foreclosure by power of sale'. Once the lender is repaid, any excess of funds is returned to the borrower.
When a borrower defaults on a mortgage note and falls into foreclosure, it is referred to as a 'judicial foreclosure'. The primary difference between the two is that a judicial foreclosure must be confirmed by a court, while a foreclosure by power of sale is unsupervised.
When a deed of trust is used, lenders are entitled to purchase the foreclosure property directly from the Trustee. When a mortgage is used to secure the property, the lender must sell the property to satisfy the debt.
The foreclosure process for deed of trust and mortgaged property is nearly the same. Both are regulated by statute which requires all interested parties must be given notice of the sale. This notice must be published in local newspapers for a specific amount of time. If the borrower is unable to become current on their payments by the deadline, the sale is conducted in a public venue to ensure the property is sold at fair market value.
In essence, the differences between a deed of trust and mortgage only affect borrowers when foreclosure is an issue. Since property secured by a trust deed bypasses the court system, the foreclosure process occurs much faster than property secured by a mortgage note.
If you are facing foreclosure and need to quickly sell real estate, Simon Volkov may have a solution to your problem. Simon is a private real estate investor who specializes in helping individuals liquidate distressed properties. Contact Simon today at 714-998-6888 and discover what options are available.