A legal document, duly executed and
delivered, that conveys title or an interest
in real property. A deed is most commonly
associated with registry, while the term
transfer typically applies to land titles.
A transfer of the title to a trustee
(neutral party) by the trustor (borrower) as
security for the performance of specified
obligations.
The use of a deed of trust instead of a
mortgage is found in selected North American
jurisdictions. In California a mortgage
instrument involving a mortgagee and
mortgagor is not used (as in Canada).
Instead, the borrower (referred to as a
trustor ) gives the legal title to a neutral
third party (the trustee ) to be held on
behalf of the lender (beneficiary). When the
loan is repaid, the trustee reconveys the
title back to the trustor. If a default
occurs, the trustee can proceed to foreclose
on behalf of the beneficiary. Proponents of
the deed of trust cite shorter time limits
for foreclosure as opposed to traditional
procedures under a mortgage.
Example of
Deed of Trust
Buyer, through ABC Realty Inc., wishes
to purchase an office tower but is unable to
find one lender who will advance the
mortgage monies necessary to close the
transaction. He does, however, have several
interested lenders who will take a portion
of the loan. Jones gives a deed of trust
(sometimes referred to as a bond mortgage ),
to a trustee who holds the title to the
office tower in trust for the various
lenders participating in the mortgage.
If Buyer defaults on payments, the
trustee is in a position to take possession
of the property and operate it for the
lenders or sell the complex and disperse the
proceeds among those lenders. When
buyer pays off the
total loan plus interest, the trustee
conveys title of the property to
the Buyer.
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