In real estate, a Deed of Trust is a security instrument used to secure repayment of a loan by placing a lien on real property. It functions similarly to a mortgage but involves three parties instead of two: the borrower (trustor), the lender (beneficiary), and a neutral third party called the trustee. The borrower conveys “bare legal title” to the trustee, who holds it in trust for the lender as security for the debt, while the borrower retains equitable title and the right to possess and use the property.
If the borrower repays the loan as agreed, the trustee reconveys full legal title back to the borrower, releasing the lien. If the borrower defaults, the trustee has the authority, typically through a nonjudicial foreclosure process, to sell the property to satisfy the debt, depending on state law. Deeds of trust are commonly used in many states because they often allow for a faster and less expensive foreclosure process than traditional mortgages.
