Mortgages and Deeds of Trust

Question 1

Deed of Trust

Answer 1

A deed of trust is a security interest in property and can be recorded. The parties to a D/T are the beneficiary (the lender), the trustor (the borrower), and the trustee (usually a disinterested third party such as a title company).

Question 2

The Trustor (Borrower)

Answer 2

The trustor (borrower) conveys bare legal title and agrees that, in the event of a default on the note that is secured by the deed of trust, the trustee can begin a foreclosure proceeding to foreclose—essentially—on the equitable title and thus give the purchaser at a foreclosure sale full title.

Notice of foreclosure proceedings must be given to all parties with an interest in the property, and of whom the foreclosing party has, or should have, actual, constructive, or inquiry notice.

Question 3

Deficiency Judgment

Answer 3

A deficiency judgment can occur when the amount owing on the note secured by the mortgage or deed of trust is greater than the current value of the property securing the debt.

Question 4

Beneficiaries Obtaining Deeds of Trust

Answer 4

A beneficiary under a deed of trust can obtain a deficiency judgment for money against the borrower only if the property securing the deed of trust is NOT a single family residence or up to 4 single-family residences and the mortgagee or beneficiary uses judicial foreclosure, because non-judicial foreclosure of a deed of trust carries an anti-deficiency provision that prohibits the awarding of a deficiency judgment.

Question 5

Mortgages

Answer 5

Unlike a deed of trust, a mortgage cannot be foreclosed using a non-judicial remedy. Moreover, the foreclosed-out mortgagor has an equitable right of redemption—a right to buy back the property—by bringing the mortgage current or paying it off within the statutory period set forth—often one year.