A trust deed, also known as a deed of trust or Potomac mortgage, transfers property title to a trustee until a loan is paid off. The trustee transfers title to the borrower when the loan is paid. The three parties to a trust deed are the settlor, trustee, and beneficiary. The trustee can sell the property through a power of sale if the borrower defaults on the loan. Trust deeds are used in some regions instead of mortgages.
A trust deed transfers title to the property to a trustee responsible for holding it in trust until a loan is paid off. It is often referred to as a deed of trust and sometimes a Potomac mortgage. The trustee must transfer title to the borrower when the loan balance is paid. It is widely used in some regions in place of a mortgage, but in other areas the borrower receives title to the property and takes out a mortgage. A trust deed is a non-deed contract, where the seller holds title until the buyer pays the loan to the seller.
The three parties to a trust deed are the settlor, the trustee, and the beneficiary. The trustee is the borrower, who has the right to own the property. The beneficiary of the trust is the mortgage company. The trustee is the company that holds title in trust for the settlor and the borrower. His main task is to transfer the deed when he receives proof that the loan has been paid in full. The secondary duty of the trustee is to sell the property if the borrower defaults on the loan and to distribute sufficient proceeds to pay off the loan to the borrower.
The basic contents of a trust deed include a legal description of the property, the original loan amount, and expediting clauses. It should also detail the terms of the mortgage, as well as the legal remedies available to both parties in the event of a legal dispute. Any prepayment penalty, if any, is often included in the trust deed, along with the monthly payment amount. The deed will also state that the trustee has the legal right to sell the property if the trustee defaults on the loan.
The trustee can sell the property without going to court through a power of sale. The process is referred to as a foreclosure by power of sale. Even if a court doesn’t oversee the proceedings, there are often laws that govern the sale, such as those that require a public notice of foreclosure. In regions where mortgages are issued instead of a trust deed, the lender must file foreclosure proceedings in court before a property can be foreclosed. It is often risky for someone interested in buying a property that has been sold through a power of sale because there is more likely to be a title dispute.
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