Who is the trustee in a deed of trust?

Written by Bill MacDonaldSeptember 14th, 20223 minute read

Nice family sittin on the lawn in front of their home

Mortgages and trust deeds specify the conditions of the loan. Both documents include the loan amount, property description, loan term (e.g., 30, 20, 15, or 10 years), and any additional lending conditions. Between mortgages and trust deeds, the parties involved are the most important difference.

A mortgage involves two parties: a lender (or mortgagee) and a borrower (or mortgagor). A deed of trust involves three parties: the borrower (or trustor), the lender (or beneficiary), and the trustee. A neutral third-party called a trustee holds ownership to the property until the borrowers pay off the loan in full.

Deeds of trust and mortgages have different foreclosure processes. To recover the property after a mortgage default, a court order is required. Court-ordered foreclosures can be time-consuming and expensive.

The escrow company's attorney starts the foreclosure procedure on behalf of the lender when a borrower fails on a trust deed.

Trust deeds and mortgages are governed by state laws. The aim of both trust deeds and mortgages is the same: "if you pay, you stay." Alaska, Arizona, Colorado, California, Illinois, Idaho, Mississippi, Missouri, Montana, North Carolina, Tennessee, Texas, Virginia, and West Virginia all need deeds of trust. Here is an example of a trust deed.

What is the meaning of a promissory note?

The borrower pledges to repay the amount borrowed in a promissory note.

A promissory note usually includes all of the conditions of the loan, such as the due date and:

  • the principal sum,
  • rate of interest,
  • date of maturity,
  • date and location of issue, as well as
  • signature of the issuer

The lender keeps the promissory note while the loan is being processed. The promissory note is stamped "paid in full" when the loan is paid in full and turned over to the borrower.

The Deed of Trust: Frequently Asked Questions

Q. Is it necessary to have a witness for a deed of trust?
A. A trust deed must be signed and witnessed.

Q. Is a deed of trust evidence of ownership?
A. The deed of trust establishes ownership of the property to the extent that it is backed by a loan. The trust deed secures a loan, whereas the deed transfers title.

Q. Does the deed of trust reveal who owns the property?
A. When the debt is paid in full, the deed of trust serves as proof of ownership.

Q. What does reconveyance of the trust deed imply?
A. When the loan is paid in full and the title to the property moves from the lender to the borrower, a deed of reconveyance is registered at the recorder of deeds' office.

Q. What are the main benefits of a trust deed over a mortgage?
A. The trust deed facilitates the lender's foreclosure process.

Q. What is the difference between being a deed holder and having a mortgage?
A. The deed is the property's title. The financial obligation is the mortgage.

Q. What's the difference between a mortgage and a trust deed?
The borrower, the lender, and the trustee are the three people involved in the deed of trust transaction. Until the loan terms are met, the trustee maintains the deed of trust. The borrower and the lender are the only people involved in the mortgage.

Q. In a deed of trust, who is the beneficiary?
A. The lender is the deed of trust's beneficiary. The borrower is referred to as a trustor. The trustee is the third party (the entity that owns the deed of trust).

Q. In a trust deed, who is the trustor?
A. The trustor is the borrower.