Is it a deed of trust or a mortgage?
A deed of trust is a common financial document used in the real estate business. Deeds of trust are commonly confused with mortgages. Mortgages do not have trustees while deeds of trust do. Deeds of trust are used in states including Texas instead of a mortgage. Texas has kept records of deeds of trust since the early 19th century.
Who Are the Parties Involved in a Deed of Trust?
A deed of trust involves three parties: the trustor, the trustee and the beneficiary. The trustor is the borrower, while the beneficiary is the lender of the loan. Unlike a mortgage, deeds of trust have a trustee who acts as an independent mediator and is the holder of the property title. The deed of trust records the original loan amount, the parties involved, the property involved, late fees that will accrue, and other additional clauses such as penalties.
What Is a Trustee and What Do They Do?
A borrower will sign to promise a lender to repay a loan. The title of the estate is then transferred to a trustee who is an independent third party who will either transfer the property over once the deed of trust is paid in full or file a notice of default in the event of a default. In a real estate transaction in Texas, a trustee is an entity that holds the "Power of Sale" in the event of a default. Power of sale is a clause authorizing the sale or transfer of the property within the terms of the agreement.
What Happens in the Event of a Default?
In the event of a default, the trustee can file a notice of default or file a substitution of trustee to pass on the responsibility of handling the foreclosure to a successor. The tenant is then given 90 days after the notice of default to make up back payments or to leave the premises. After 90 days, the trustee has the power to sell the property.
Tags: deed trust, event default, notice default, file notice, file notice default, real estate, transfer property