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What is a Deed of Trust?

Deed of Trust

A Deed of Trust is a three-party legal instrument wherein a borrower conveys asset title to a neutral trustee as collateral while repaying a debt. Should the borrower meet obligations, the trustee releases the deed; otherwise, the trustee can initiate foreclosure. This contrasts with standard two-party mortgages by incorporating an impartial entity overseeing compliance.

Key Points

  • Triangular Relationship: Borrower, lender, and trustee share roles and responsibilities.
  • Conditional Title Transfer: The asset is held by the trustee until obligations are fulfilled.
  • Default Procedure: Trustee may auction or sell to recover unpaid balances.
  • Jurisdiction Specific: Common in some regions but less so in others.

By ensuring an unbiased third party holds legal rights until the debt is cleared, the deed of trust structure often streamlines property repossession if payment lapses.

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