Trust deeds are contracts that are entered into between a borrower and a lender. It is used to secure the payment of the debt of the borrower by the transfer of a specified interest in the borrower’s assets to a third party. The third party is called a trustee. This type of contract provides the trustee with authorization to sell the property in the event that the borrower defaults on payment of the debt.

There are normally three parties who are involved in the setup of a deed of trust. The first party is the borrower who has to provide the trustee with lawful title to his or her property. The lender is the second party to the transaction and this is the entity who has offered the loan. The final party in the transaction is the trustee who safeguards the property for the benefit of the lender.

There are three different trust property deed types. Warranty deeds transfer ownership of the property without any security. Grant deeds transfer ownership with a commitment that the said property has not already been transferred. Quitclaim deeds transfer the rights of the transferring party as regards the property.

Trust deeds can be compared to mortgages. The main difference is that there is an actual ownership transfer to the lender in the case of a mortgage. With a trust deed, title is not transferred. Mortgages are normally related to loans that are provided on real estate.

Certain jurisdictions allow for a second or even a third contract to be entered into. The second deed would not have the same priority as that of the first. Once the loan has been settled in full, the lender has the right to request the return of the property from the trustee by means of reconveyance. Reconveyance is a process whereby the lender issues a document stipulating that he or she is relinquishing claim to the property. Upon settlement of the full debt, a mortgage satisfaction should be recorded with the registrar of deeds in the particular county records.

If the borrower does not meet the obligations of the debt, the lender has the legal right to file a notice stating that fact. Once the borrower has received issuance of the notice, the trustee has the right to start the process of foreclosure of the property. If this is undertaken, the trustee will put the property up for sale via auction and it would be sold to the highest bidder.

Once the sale has been carried out, it is possible for the borrower to buy back the specified property. This can be done during a specified time period. The borrower has the opportunity to buy the property at the auction price, along with any other charges, plus interest. This is known as a right of redemption.

Lenders who make use of trust deeds or mortgages are able to assign the mortgage to alternate lenders. When this road is taken, the assignee will take over all the rights the original lender had. For the assignment to be completed and for it to be valid, it has to be stated in writing. The assignment must also be recorded in the county records where the property is located or held.

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