WHAT IS A DEED OF TRUST?

In California, the document most commonly used to create a lien in real property is a deed of trust, not a mortgage. For many purposes, the two terms are indistinguishable. In technical terms, the primary difference is that a deed of trust creates a three-party relationship.

The buyer-borrower conveys his or her property, in trust, to a neutral third party, who is called the trustee. In theory, the trustee has equitable title to the land. The trustee holds its equitable title for the benefit of the lender, who is called the beneficiary. As a rule, the trustee will be a large title company such as LandAmerica Title or TICOR.

The deed of trust contains a key provision: the power of sale. It provides that, if the owner-borrower defaults in his or her obligations under the deed of trust, then the trustee is entitled to sell the property, under the power of sale, in a non-judicial foreclosure. As will be described below, a non-judicial foreclosure is faster and less expensive to process than a judicial foreclosure. Thus, virtually all real property liens in California are deeds of trust not mortgages. Remember, however, that mortgages are legal in California, and every so often you will see one in practice. A mortgage, however, cannot be foreclosed non-judicially.

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