A deed of trust (DOT), also known as a trust deed, is a document that conveys title to real property to a trustee as security for a loan until the grantor (borrower) repays the lender according to terms defined in an attached promissory note. It’s similar to a mortgage, but differs in that mortgages only includes two parties (borrower and lender). The laws of each state determine whether to use a deed of trust or a mortgage.
There are three parties to a deed of trust: the borrower (trustor), the lender (beneficiary), and the trustee. The trustee, typically a title agency or other disinterested party, serves two purposes: to initiate the foreclosure process for the lender if the borrower defaults on the loan, and to transfer (reconvey) the property back to the borrower after the debt is paid in full.
The short form deed of trust covers the requirements for most non-institutional lenders. In addition to any other necessary documents, the short form adds another step of recording a fictitious or master deed of trust.
A fictitious/master deed of trust is a blank, unsigned long form deed of trust with a cover sheet attached, requesting recording for reference purposes only. By referencing the recorded instrument information on the fictitious DOT, all rights and obligations of the parties are preserved. Because of this, it’s generally less costly to record the short form DOT.