Trust Deeds

Trust Deeds and Security Instruments ## The Deed of Trust Structure in California California uses the deed of trust (trust deed) as its primary mortgage security instrument — not a traditional mortgage. This distinction is critical for the California exam. ### Three Parties in a Deed of Trust 1. Trustor (Borrower): Borrows money and conveys bare legal title to the trustee as security; retains equitable title (right to possess and use the property) 2. Trustee: Neutral third party (title company, bank trust department) holding bare legal title during the loan; acts only when directed — reconveying title upon payoff or foreclosing upon default 3. Beneficiary (Lender): Holds the promissory note; has the economic interest in the security arrangement ### Promissory Note vs. Deed of Trust The promissory note is the borrower's personal promise to repay — it is the primary obligation. The deed of trust secures that promise with the real property. If the note is sold to Fannie Mae or another investor, the deed of trust follows the note automatically. ### Deed of Reconveyance When the loan is fully repaid, the beneficiary instructs the trustee to issue a deed of reconveyance — restoring full legal title to the borrower and removing the deed of trust lien from the property records. --- ## Deed of Trust vs. Mortgage Comparison | Feature | Deed of Trust (CA Standard) | Mortgage | |---|---|---| | Parties | Three: trustor, trustee, beneficiary | Two: mortgagor (borrower), mortgagee (lender) | | Title during loan | Trustee holds bare legal title | Mortgagor (borrower) holds title | | Foreclosure method | Non-judicial (trustee's sale) | Judicial (court proceeding) | | Speed | Faster (approx. 4…