Deed of Trust Archives

January 31, 2022January 31, 2022

The Deed of Reconveyance

A person with their arms outstretched towards the sun happy that their mortgage is paid off.

Exiting a Mortgage in a “Deed of Trust State”

If your mortgage exists in the form of a deed of trust, what happens at final payoff time? You’ll receive a deed of reconveyance, signed by the lender and notarized. Alternatively called a mortgage satisfaction or a full reconveyance form (depending on your state’s legal custom), it’s your official proof of title transfer from the lender.

States that use the deed of trust use this method to confirm that your loan has been paid in full. This occurs when you are selling the home, or in a refinance situation, when you get a new loan in place of the old.

September 10, 2019September 10, 2019

You Have One Job: The Narrow Duty of a Trustee Under a Deed of Trust

Image of a person in a business suit standing in front of stairs to a building. Captioned: You Have One Job: The Narrow Duty of a Trustee Under a Deed of Trust

In states using deeds of trust, a trustee is a third party who holds legal title to a property until the homebuyer or commercial developer pays off a loan associated with the parcel—or until the borrower defaults.

When a state’s law allows for deeds of trust as instruments to hold legal title to a property:

A lender financing the sale or development can easily exercise the right to foreclose.
Foreclosure occurs not through the court, but under the power of sale clause in the deed of trust. (This allowance for non-judicial foreclosure differentiates deeds of trusts from mortgages and some land contracts.)

The main thrust is to lower risk for lenders. Perhaps it’s no wonder that deed of trust states rarely go to bat for a borrower fighting foreclosure.

In this analysis, we’ll look at the trustee’s narrow liability under the deed of trust (not to be confused with a living trust, in which a trustee must comport with exacting fiduciary duties.)

We’ll also review a recent case in point, involving a commercial borrower in California.

Finally, we’ll look at the exception that proves the rule: North Carolina.

July 15, 2019July 15, 2019

Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?

Image of a road though the desert in Nevada with blue skies and desert mountains in the background. Captioned: Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?

In May 2019, effective October 1, 2019, Nevada passed Senate Bill 382 amending the law pertaining to deeds of trust, foreclosure sales, and homeowners’ associations.

Among other things, this is a change to Nevada Revised Statute § 40.050, whose language states that a mortgage of real property is not deemed a conveyance. If a mortgage does not constitute a conveyance, the mortgage lender may take possession on the home upon the inhabitant’s default, bypassing a judicial foreclosure sale.

Nevada employs a deed of trust between the home buyer and the lender. A deed of trust places the legal ownership of a home with a designated trustee until the buyer—who holds equitable ownership—pays off the loan.

Of course, some buyers do experience financial challenges and find themselves unable to pay their mortgages.

Here, we briefly explore the ramifications, as seen through a case that shook mortgage lenders’ expectations in homes they held legally through deeds of trust.

June 17, 2019June 16, 2019

What Is a Deed of Trust?

With a deed of trust, a buyer pledges an interest in real estate to secure a loan. In some states this takes the place of a mortgage document. (For a list of states commonly using deeds of trust see the section on Mortgage States and Deed of Trust States in our previous post, “You’ve Paid Off the Mortgage. What Happens Now?”)

Whereas a mortgage agreement is formed between the borrower and the lender, a deed of trust, also known as a trust deed, has one key difference. The trust deed designates a trustee—a third party who retains legal ownership of the home until the buyer completes the payoff.

April 4, 2019April 4, 2019

You’ve Paid Off the Mortgage. What Happens Now?

Congratulations! Paying off a mortgage is an impressive milestone.

Now that you have paid off all the debt on your property, your home state’s law will direct your lender to take certain actions.

The lender will send you a certificate of satisfaction. This certificate, which the lender records in your home county, notifies the public that you have satisfied your obligation, and the lender has removed the lien from your property.

A few details of this process depend on what state your property is in, and whether your debt was secured through a deed of trust.