Deed of Trust

What Is a Deed of Trust?

A deed of trust is a three-party real estate financing document used in roughly half of U.S. states (California, Texas, Virginia, Washington, and others) as the security instrument for a real estate loan. The borrower (trustor) conveys legal title to a third-party trustee, who holds it on behalf of the lender (beneficiary). When the loan is repaid, the trustee reconveys title to the borrower. If the borrower defaults, the trustee may sell the property under a power of sale provision without court involvement.

Key Differences from a Mortgage

• **Parties**: deed of trust has three parties; mortgage has two (borrower and lender) - **Foreclosure**: deed of trust typically allows non-judicial foreclosure under a power of sale clause; mortgage usually requires judicial foreclosure - **Timeline**: non-judicial foreclosure under a deed of trust is generally faster and less costly - **Redemption rights**: states often limit the borrower's right to redeem after a trustee's sale

State Law and Practice

Whether a state uses deeds of trust, mortgages, or both is a matter of state law and lender preference. Some states permit both instruments, with lenders choosing based on procedural advantages. Both serve the same economic function — securing a loan with real property — but the foreclosure mechanics differ significantly. Borrowers should understand which instrument governs their loan, because non-judicial foreclosure can move quickly once a notice of default is recorded.