Who Owns the Deed of Trust?
A deed of trust is a type of mortgage agreement used in many states across the country. This type of mortgage is a three-party arrangement involving you as the borrower, your original lender and a neutral third party. The owner of the deed or property title varies based on your loan's status. Ownership of the deed legally transfers if you default on your loan.
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Owner of Deed
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The owner of a deed of trust is the lender who originally extended you the credit to purchase your home, so this could be a bank, credit union or private mortgage company. The original lender retains the title of the property throughout the repayment period. The owner of the deed is not in active possession of the deed during your term of repayment. The deed is held in trust -- hence the name -- by a neutral third party for the duration of your loan payment.
Holder of Deed
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The deed of trust names the deed holder or trustee as the beneficiary in the event of loan default. The lender is empowered under this agreement to transfer the title of the property to the deed holder if you stop making payments on your home loan. A deed of trust uses nonjudicial foreclosure proceedings once the title is transferred by the lender into the possession of the deed holder. This method of foreclosure allows the trustee to enact foreclosure proceedings without the need of a court order.
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Lender and Holder Responsibilities
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The lender's responsibility to service your home loan ends when the title to the property is legally transferred to the trustee. Once the trustee receives the title, he is empowered by the deed to enact a foreclosure sale of your home. This is performed through the power-of-sale clause included in the deed of trust. The deed holder must comply with state regulations regarding advertising your home for sale in public forums. Your home is auctioned off by the trustee to the highest bidder -- who must pay cash or its equivalent -- within a short amount of time after the conclusion of the auction.
Rights of Redemption
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The right of redemption in foreclosure when a deed of trust is used varies by state. The right of redemption is a period where you may attempt to reclaim your foreclosed property by paying the remaining balance on your mortgage. It is uncommon for a state to allow you a right of redemption if a power of sale clause was used to foreclose on your property. The right of redemption period in states where it is allowed can vary from 90 days up to several years.
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