A mortgage security instrument used in many states where a neutral third-party trustee holds legal title until the loan is fully repaid.
Full Definition
In states that use trust deeds (California, Texas, Colorado, and about 30 others), a deed of trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral trustee. The trustee holds legal title to the property until the loan is paid off, at which point a reconveyance deed is recorded to return full title to the borrower. If the borrower defaults, the trustee can conduct a non-judicial foreclosure under the power of sale clause — typically faster and cheaper than judicial foreclosure. In the remaining states, a traditional mortgage is used, involving only the borrower and lender, with judicial foreclosure required. The practical difference to most borrowers is minimal.
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