What is the difference between a mortgage and a deed of trust?

The distinction between a mortgage and a deed of trust primarily revolves around the number of parties involved in the transaction. A mortgage typically involves two parties: the borrower (mortgagor) and the lender (mortgagee). In this setup, the borrower secures a loan by pledging their property to the lender as collateral for the debt.

On the other hand, a deed of trust introduces a third party known as the trustee. In this arrangement, the borrower conveys the legal title of the property to the trustee, who holds it on behalf of the lender until the loan is paid off. This framework is often used in certain states and creates a system where the trustee can facilitate a non-judicial foreclosure process if the borrower defaults on the loan.

The key takeaway is that the presence of the trustee in a deed of trust transaction adds an extra layer of oversight and functionality in the lending process, distinguishing it markedly from the more straightforward mortgage agreement.