finance
deed of trust
A security instrument used in many states instead of a mortgage, involving three parties: the borrower (trustor), the lender (beneficiary), and a neutral trustee who holds legal title until the loan is paid. If the borrower defaults, the trustee can usually sell the property through a nonjudicial foreclosure under a power of sale. When the loan is paid, the trustee reconveys title.
- Exam tip
- Three parties: trustor (borrower), beneficiary (lender), trustee (neutral). Deeds of trust are usually linked with nonjudicial foreclosure.
- Example
- A buyer signs a deed of trust naming a title company as trustee; after the final payment, the trustee issues a deed of reconveyance.
Related terms & state variants
Sources
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Last verified: 2026-10-23