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trust deed (TD)

loan to buy property (voluntary lien), trustee holds title

A trust deed or deed of trust (they are the same thing) is a voluntary lien on a property, that is used to hypothecate a property. Hypothecate means the property is collateral for the loan but the borrower gets to live in the home, the lender does not hold it for security. A trust deed involves three parties, the lender (also called the beneficiary), the borrower and the trustee who is a neutral third party. The trust deed conveys bare legal title to the trustee and equitable title to the borrower. Equitable title allows the owner to use the property normally. In the event of default, the trustee forecloses on the property. (A trust deed allows a quicker trustee foreclosure instead of a judicial foreclosure which is required by a mortgage.) When the loan is paid, the trustee conveys bare legal title to the borrower through a reconveyance deed. Note that a trust deed is the same thing as a deed of trust. Be careful not to confuse a trust deed with a grant deed. A grant deed is a conveyance with warranties. A trust deed is a voluntary lien (loan to buy the property) by giving bare legal title to an unbiased third party, the trustee. Synonyms: deed of trust Related Words: mortgage, voluntary lien, trustee, bare legal title, naked title

Multiple Choice Question

trust deed (TD)
A lease used when a property manager “trusts” a tenant
B personal property
C loan to buy property (voluntary lien), trustee holds title
D deed used when a property is paid for in full (”cash”)

Correct Answer: c

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