What is a deed of trust, in the lines that are yours
Fannie Mae and Freddie Mac publish standard deed of trust forms by state, and California’s, Form 3005, has 30 numbered sections. If yours is one of them, almost every word is the same printed text everyone else on that form signed. The only parts written for you are the blanks, and most of them sit at the top:
- The recording box. “After Recording Return To:” is where the county mails the recorded copy. The band above the line is left empty for the county, which stamps its recording data there. A loan number or a MERS number (MIN) near the top was added by your lender; the standard form doesn’t print either.
- Borrower. You. The form calls you “the trustor.”
- Lender. The bank, which the form names “the beneficiary.”
- Trustee. A name and address. The lender can swap in a new trustee later by recording a document at the county, so the trustee at payoff may not be the one printed here.
- Note. The amount you borrowed and the date the debt has to be paid in full.
- Riders. Checkboxes for an adjustable rate, a 1-4 family home, a second home, a condo, a planned unit development, or something else. A checked rider becomes part of the document.
Further in, under “Transfer of Rights in the Property,” come the other two fill-ins: the legal description of the land and the street address. Then come your signatures and a space for the notary’s acknowledgment.
Deed of trust vs mortgage
Both do the same job: they pledge the home for the loan. The standard form calls itself a “Security Instrument,” and the CFPB’s annotated copy notes “This document may be called the Security Instrument, Deed of Trust, or Mortgage.”
The difference is the trustee. A mortgage is between you and the lender. A deed of trust adds a third party, and this is the sentence that adds it: “Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described property.” That power of sale lets the trustee foreclose “without first getting a court order.” Many states allow either document.
Does a deed of trust show ownership?
No. Your deed is what made you the owner. The deed of trust is the lender’s claim on the house. In most states that use deeds of trust, you technically transfer legal title to the trustee; in others, the trustee “merely holds a lien on the property.” Either way, it only secures the loan, and a reconveyance ends it when you pay off.
If your copy names MERS as the beneficiary instead of your bank, you have the MERS version of the form. That version says MERS “is acting solely as a nominee for Lender.” Your lender is still your lender.
Three sections you’ll need later
You’ll rarely reopen most of the numbered sections. These three are the exceptions. The numbers are California’s; other states’ versions may number them differently, so go by the headings.
If you sell or transfer the house: “Transfer of the Property or a Beneficial Interest in Borrower” (section 19)
This is the due-on-sale clause. If any part of the property, or any interest in it, is sold or transferred without the lender’s written consent, the lender “may require immediate payment in full.” Read it before you sell or deed a share of the house to someone else.
If payments stop: “Acceleration; Remedies” (section 26)
Here’s the power of sale at work. The lender first sends you a notice that names the default and sets a date to fix it, at least 30 days out unless the law says otherwise. If you don’t, the lender can demand the whole balance and “may invoke the power of sale,” and the trustee “will sell the Property at public auction to the highest bidder.” If you get that notice, talk to a housing counselor or a lawyer before the deadline in it passes.
When you pay it off: “Reconveyance” (section 27)
“Upon payment of all sums secured by this Security Instrument, Lender will request Trustee to reconvey the Property.” On California’s form, the lender can charge you for that only if the fee goes to a third party, such as the trustee.
What happens when a deed of trust is paid off
The trustee records a deed of reconveyance at the county, and that removes the lien. Some states set deadlines. In California, the lender has 30 days after payoff to send the trustee the paperwork, the trustee has 21 days after that to record the reconveyance, and a lender or trustee that breaks the rule owes $500 plus damages.
Don’t assume it happened. Look up your property in the county’s records, or ask the company you paid off. The CFPB warns “there may be a delay”, and says your lender should also return the original note. The reconveyance names the deed of trust it cancels by two things: its date and the instrument number the county gave your copy when it recorded it. Our lien release guide covers what to do if it never shows up.
Keep the recorded reconveyance and the returned note with your deed, for good. Drop the reconveyance into Granite and we file it as its own document type and pull out the lender, the release and recording dates, and the instrument numbers of both the release and the deed of trust it cancels.