A deed of trust is an instrument used to secure an underlying debt obligation tied to real property, such as a promissory note on a home loan. If an individual defaults on a note secured by a deed of trust, it is foreclosed on to protect the lender's interest. In home loans, a promissory note is signed at closing along with a deed of trust.
Provisions of an Enforceable Deed of Trust
To be enforceable, a deed of trust must contain certain elements. The deed must be in writing. It also must be signed by the borrower in front of a notary. Some states like California require a thumbprint in the notary’s journal. The person signing the deed must be legally competent, and there must be a legal description of the property. The deed also must be recorded to establish public notice as to the conveyance. The verbiage also must state the correct vesting of the borrower.
Legal Description and Vesting
The legal description of a property is the tract, map, book and page. It is different than the physical address. A deed which just shows the physical address is not enforceable. To determine the legal description, contact the county recorder where the property is located or contact a local title company. The vesting is the method by which a borrower holds title. For example, a married couple might hold title as: John Smith and Mary Smith, husband wife as joint tenants, or, they might hold title as John Smith and Mary Smith as community property. Each method has different legal implications.
All deeds of trust must be recorded in the county where the property is located. The recording serves as a public notice as to the disposition of a property. This becomes part of the public abstract of records. Deeds of trust are usually recorded by the title company in a sales transaction to insure proper filing. When recorded, the county affixes a time stamp on the document to indicate the day and time it went into the public record. The recorded date on a deed of trust will determine whether it is a first, second, or third mortgage. The determination is based solely on the recorded date.
A trust deed can be valid but unenforceable. For example, if a deed is properly signed in front of a notary and contains all the correct information including the legal description and borrower vesting, but is not recorded; the deed would be considered valid but unenforceable. This means if another deed were recorded on the property subsequent to the unrecorded deed, the recorded deed would have priority. The accuracy of a deed of trust can determine its enforceability. If there is a misspelled street address or the borrowers name is misspelled, the deed is probably unenforceable.