Deed of Trust

A type of mortgage deed in which a third party holds the title in trust as a security, while the borrower continues to make payments to the lender. Most residential mortgage lenders will not allow the loan to close while the subject property is in a trust. The loan programs that will close with a trust normally use a deed of trust. The borrower conveys the legal title to the trustee, who retains the property until the debt to the lender is paid in full. If the borrower defaults, the trustee may sell the subject property to satisfy the debt, without benefit of foreclosure proceedings.

Note that the deed of trust is different from the deed in trust. For more information, see the "All About Deeds" and "Mortgage Deeds and Promissory Notes" articles in the "Real Estate In-Depth" section.

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