In real estate, a trust deed or deed of trust, is a document wherein specific financial interest in the
title to
real property is held by a trustee, which holds it as security for a loan. When the loan is fully paid, the monetary claim on the title is transferred to the borrower by reconveyance. If the borrower defaults on the loan, the trustee has the right to
foreclose on and transfer title to the
lender or sell the property to pay the lender from the proceeds
Trust deeds are the the most common instrument used in the financing of
real estate purchases in
Alaska,
Arizona,
California,
Colorado,
Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, and West Virginia whereas most other states use
mortgages. Deeds of trust can also be for loans made for other purposes but where real estate is used for collateral.
Layers of trust deeds
There are three parties to a deed of trust, the borrower, trustee, and beneficiary, as opposed to a mortgage with which there are only two parties, the borrower and the lender.