What is a Deed of Trust?
A deed of trust is a legal document used in many states as part of the mortgage process. A deed of trust must include some basic information regardless of the state in which it is executed. For instance, the name of the borrower, the lender and the trustee must be included. Additionally, the terms of the loan must be stated clearly on the instrument. Definitions of the terms used in the deed of trust will also be found within the document itself.
Deed of Trust Purpose
The purpose of a deed of trust is to give the lender a security interest in the property that is the subject of a mortgage. In some states, a lender actually holds the title to a property when a buyer borrows money to purchase a property. In these states, a deed of trust is not used. In other states, the title is actually held by a trustee for the benefit of the lender in the event the borrower defaults on the loan. In those states, a deed of trust is required. When the loan amount is paid in full, the borrower receives the title from the trustee. A deed of trust indicates who the borrower is, who the lender is, the terms of the loan and legally appoints the trustee that will hold the title. In some states a trustee can be anyone over the age of 18 while other states have very specific requirements for who may be a trustee.
Examples of a Deed of Trust
States that utilize a deed of trust may have specific legal requirements for wording or structure of a deed of trust. For that reason, anyone wishing to construct a legal deed of trust document should check the legal requirements in the state where the property is located. An example of what a deed of trust looks like can be found on the American Law Institute-American Bar Association website at www.ali-aba.org In addition, many companies will provide a fill in the blank deed of trust document for a fee online.
States That Use Deeds of Trust
As of 2010, the following states use a deed of trust: Alabama, Alaska, Arkansas, Arizona, California, Colorado, District of Columbia, Georgia, Hawaii, Idaho, Iowa, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, North Carolina, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.