| of trusts are probably one of the safest investments | | | | legally notify the world that the property in question has |
| you can make that offers you a high return, but what | | | | now been pledged to secure a loan. |
| exactly is a trust deed? | | | | There are three parties involved in a trust deed: |
| A trust deed, or deed of trust is a document that is | | | | 1. Beneficiary - Investor/Lender/note holder |
| used to secure the debt on a home acting as a | | | | 2. Trustor - Borrower |
| mortgage. A trust deed is recorded as a lien on real | | | | 3. Trustee - Third party selected by the investor who |
| property. However, although a deed of trust acts like a | | | | has the legal power to act on the behalf and hold title |
| mortgage, it is important that you understand there are | | | | until the note has been paid. |
| differences between a mortgage and a deed of trust. | | | | When making a trust deed investment, the deed of |
| The fundamental difference between deed of trusts | | | | trust recorded against the borrower’s property |
| and mortgages is the utilized procedure that is | | | | title is what secures the lenders investment. When |
| followed if the borrower neglectes his or her obligation | | | | making an investment in a deed of trust, the trustor |
| to pay off the loan and breaks the agreement. | | | | (borrower) makes the property transfer, in trust, to the |
| Concerning mortgages, if a borrower | | | | trustee (independent third party). The trustee then |
| “defaults”, such as by failing to make | | | | holds the conditional title on the behalf of the |
| monthly payments or meet other conditions of the loan, | | | | beneficiary investor/lender/note holder), and then either |
| such as carrying homeowner’s insurance and | | | | of the following takes place: |
| maintaining the house in good repair, the lender have to | | | | 1. The trust deed will be returned to the borrower once |
| bring a court action in order to foreclose on the | | | | they satisfy all of the terms and conditions that were |
| property. Nevertheless with a trust deed, if the | | | | outlined in the promissory note. |
| homeowner does not pay the loan, the foreclosure | | | | 2. The property will be put up for sale should the |
| process is usually much faster and less complicated | | | | borrower default - also known as foreclosure. |
| than the formal court foreclosure process. | | | | Foreclosure is the process that is taken by the |
| A trust deed is used as security for a loan on real | | | | investor in order to sell the property to a bidder from a |
| property, and the specifics regarding the loan are | | | | third party, or to obtain title to the property. Usually the |
| written in a promissory note. A deed of trust is then | | | | foreclosure sale satisfies the debt that is owed to the |
| documented at the county recorder’s office to | | | | investor. |