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Deed/Mortgage

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Deeds and Mortgages

Deed of Trust

A deed of trust is similar to a mortgage contract except that a deed of trust involves a third party called a trustee, usually a title insurance company, who acts on behalf of the lender. When you sign a deed of trust, you are in effect giving the trustee title (ownership) of the property, but holding on to the right to use and live in it. The lender or trustee holds the original deed of trust until you repay the loan on your home. Unlike a mortgage, a deed of trust also gives the lender the right to foreclose on your property without taking you to court first.

Mortgage

If you can’t repay the loan on your home, a mortgage gives the lender the right to foreclose on the property and sell it to get back their money. A deed of trust serves the same purpose as a mortgage, however some states traditionally use one or the other - in some cases both, depending on the custom in each county. With a mortgage, the lender must go to court to foreclose on a property.

Your State:

Deed of Trust States:
Alaska Arizona California
Mississippi Missouri Nevada
North Carolina Virginia  Washington DC

Mortgage States:
Alabama Arkansas Connecticut
Delaware Florida Hawaii
Indiana Kansas Kentucky
Louisiana Maine Massachusetts
Michigan Minnesota New Hampshire
New Jersey New Mexico New York
North Dakota Ohio Oregon
Pennsylvania Rhode Island South Carolina
Vermont Wisconsin  

States that use both Deeds of Trust and Mortgages:
Colorado Idaho Illinois
Iowa Maryland Montana
Nebraska Oklahoma Oregon
Tennessee Texas Utah
Wyoming Washington West Virginia

Security Deed:

Georgia uses a Security Deed

What Is The Difference Between A Mortgage And A Deed of Trust?

When a borrower signs a promissory note, he is agreeing to pay the lender a specific amount of money according to certain conditions. In order for the lender to protect his interests, he will require that the borrower sign a mortgage or similar security instrument in favor of the lender. This may be in the form of a mortgage or a deed of trust. Whichever document is used, the purpose of both types of documents is to secure the note and offer protection to the lender.  

Depending on where the property is located, state law will determine which type of security instrument must be used. In title theory states, a mortgage is used and it conveys ownership to the lender. A clause in the mortgage provides that title reverts back to the borrower when the loan is paid. In lien theory states, the mortgage creates a lien only on the property and the title remains with the borrower. The lien is removed when all the payments have been made. 

Some states are considered modified lien theory states and in these states the title remains with the borrower, but the lender may take title to the property if the borrower defaults. 

The basic difference between the mortgage as a security instrument and a Deed of Trust is that in a Deed of Trust there are three parties involved, the borrower, the lender, and a trustee, whereas in a mortgage document there are only two parties involved, the borrower and the lender. In a Deed of Trust, the borrower conveys title to a trustee who will hold title to the property for the benefit of the lender. The title remains in trust until the loan is paid. 

Often a title company, escrow company or bank, is listed as the trustee on the Deed of Trust. When the loan has been paid, the trustee will issue a release deed or trustee's reconveyance deed. This deed of reconveyance should be recorded at the county recorder's office, to make public notice that the loan has been paid and that the lender's interest in the property has ended. 

Another difference between a mortgage and a deed of trust is the manner in which foreclosure proceedings take place. State law will determine the method of foreclosure which must be used. Generally, the rules when using a Deed of Trust allow for a faster foreclosure time than with a judicial foreclosure required with a mortgage. Under a Deed of Trust, when the borrower defaults on the loan, the lender delivers the Deed of Trust to the trustee, who then is instructed to sell the property. 

After proper notices have been posted and rules are followed, the property is sold at a trustee's sale and the loan is paid. Be careful not to confuse a deed, which conveys title and is evidence of ownership to property, with a Deed of Trust, which is a means of securing a note and providing for foreclosure proceedings.

What is a deed? 
A deed is the document that transfers ownership of real estate. It contains the names of the old and new owners and a legal description of the property, and is signed by the person transferring the property. 

Do I need a deed to transfer property? 
Almost always. You can't transfer real estate without having something in writing. In some situations, a document other than a deed is used--for example, in a divorce, a court order may transfer real estate from the couple to just one of them. 

I'm confused by all the different kinds of deeds--quitclaim deed, grant deed, warranty deed. Does it matter which kind of deed I use? 
Probably not. Usually, what's most important is the substance of the deed: the description of the property being transferred and the names of the old and new owners. Here's a brief rundown of the most common types of deeds: 

A quitclaim deed transfers whatever ownership interest you have in the property. It makes no guarantees about the extent of your interest. Quitclaim deeds are commonly used by divorcing couples; one spouse signs all his rights in the couple's real estate over to the other. This can be especially useful if it isn't clear how much of an interest, if any, one spouse has in property that's held in another spouse's name. 

A grant deed transfers your ownership and implies certain promises--that the title hasn't already been transferred to someone else or been encumbered, except as set out in the deed. This is the most commonly used kind of deed, in most states. 

A warranty deed transfers your ownership and explicitly promises the buyer that you have good title to the property. It may make other promises as well, to address particular problems with the transaction. 

Does a deed have to be notarized? 
Yes. The person who signs the deed (the person who is transferring the property) should take the deed to a notary public, who will sign and stamp it. The notarization means that a notary public has verified that the signature on the deed is genuine. The signature must be notarized before the deed will be accepted for recording 

After a deed is signed and notarized, do I have to put it on file
anywhere? 

Yes. You should "record" (file) the deed in the land records office in the county where the property is located. This office goes by different names in different states; it's usually called the County Recorder's Office, Land Registry Office or Register of Deeds. In most counties, you'll find it in the courthouse. 

Recording a deed is simple. Just take the signed, original deed to the land records office. The clerk will take the deed, stamp it with the date and some numbers, make a copy and give the original back to you. The numbers are usually book and page numbers, which show where the deed will be found in the county's filing system. There will be a small fee, probably about $5 a page, for recording. 

What's a trust deed?
A trust deed (also called a deed of trust) isn't like the other types of deeds; it's not used to transfer property. It's really just a version of a mortgage, commonly used in some states (California, for example). 

A trust deed transfers title to land to a "trustee," usually a trust or title company, which holds the land as security for a loan. When the loan is paid off, title is transferred to the borrower. The trustee has no powers unless the borrower defaults on the loan; then the trustee can sell the property and pay the lender back from the proceeds, without first going to court. 

Preparing the Deed

The transfer of real estate from one living person to another is the most common type of transaction.  Title may be acquired by will, descent, condemnation, adverse possession, or deed.  The latter is the vehicle for the escrow closing process.

There are two types of deeds in common use - Statutory Warranty Deed and the Quit Claim Deed.

Statutory Warranty Deed  - contains the seller's warranty as to the qualify of legal title being conveyed.  This warranty has six categories:

  1. Covenant of Seisin:  this warrants that the grantor in fact owns the estate or interest being conveyed.

  2. Covenant against Encumbrances:  this warrants that there are no encumbrances against the title, except those state in the deed.

  3. Covenant of right to Convey:  the grantor owns the estate and thus has the power to convey.

  4. Covenant of Quiet Enjoyment:  the grantor warrants that the grantee will not be disturbed by others claiming a lawful interest in the property.

  5. Covenant for Further Assurances:  the grantor promises to execute  any documents that may be needed in the future to make good the title of the grantee.

  6. Covenant of Warranty:  the grantor will defend the grantee's title against other lawful claims, as of the date of the conveyance.

Quit Claim Deed - conveys title with no warranties.  The grantor simply releases whatever right, title or interest (if any) held at the time of the conveyance.

The Warranty Deed is used in most sale transactions.  The Quite Claim Deed is commonly used as a vehicle to demonstrate that any possible ownership interest has been extinguished, such as from a husband whose wife is acquiring property as her separate estate.  Most lenders will require that the husband sign away any potential interest, by Quit Claim Deed, as well as the Deed of Trust, to indicate an awareness that the property will be encumbered by a debt.

Essential Components of a Deed

  1. The name of the Grantor (seller)
  2. A recital of consideration (e.g. "Ten Dollars and other Good and Valuable Consideration", or "Love and Affection")
  3. Words of conveyance (e.g. "conveys and warrants")
  4. The name of the Grantee (buyer)
  5. A description of the land conveyed
  6. The signature of the grantor
  7. Notary acknowledgement (the Deed is recorded to give constructive notice of the world  of the conveyance; all documents must be notarized, if they are to be recorded)

Grantor/Grantee Names

Title vests only in legal entities, which means a natural person or persons, partnership or corporation.

The Grantor (seller) will deed-out the same way they took title.  If their name was incorrectly shown on that conveyance document, or has changed since then, it should be shown as "John L. Harrison", who acquired title as "John Harrison".  The Grantee (buyer) will instruct the closer as to how they want to take title.  This must be coordinated with the Lender to be sure the name or names appears the same on all documents (since the note and deed of trust are customarily prepared by the Lender).

It is best to use full names, that should eliminate confusion with another person having a similar name.  As an example if S. Jones is rather vague, where Sherry Ann Jones is much more specific.  Avoid the use of nicknames.  If a person feels strongly about having it included, the lender may make a notation in parenthesis when notating the nickname.

The marital state of the parties is shown to alert the title company that a spouse may be involved, which is most important in community property state.

Examples:  

Married or single persons:

  • Larry G. Goldsmith and Lorrie L. Goldsmith, husband and wife
  • Larry G. Goldsmith, an unmarried person
  • Larry G. Goldsmith, as his separate estate (indicating a married person)

Joint Tenants:

  • Larry G. Goldsmith and Lorrie L. Johnston, as joint tenants with the right of survivorship, and not as tenants in common

Corporation or Partnership:

  • Goldsmith Construction, Inc. 
    By:  (Signature)                    
    Larry G. Goldsmith, President
  • Goldsmith Construction, a partnership (or a limited partnership, if that is the case)
    By: (Signature)                     
    Larry G. Goldsmith, Executive Vice President

Personal Representatives:

  • Larry G. Goldsmith, as personal representative of the estate of Lorrie L. Johnston.
  • Larry G. Goldsmith, as trustee of the Johnston Trust
  • Larry G. Goldsmith, as guardian of the estate of Lorrie L. Johnston, a minor

The Property

The legal description for the subject property will be put on the deed. Most lenders take the legal description off the title insurance policy.   If it is a lengthy and complex description, the loan document preparer may simply photocopy the description and attach it to the document, showing "attached" in the space provided for "property".

Statements following the legal description:

If the subject property includes an easement, and is the "servient parcel" (the one over which the easement runs), they include this statement following the legal description:

Subject to an easement for ______________ purposes recorded on November 11, 1999, under Auditor's file No.____________, Records Sacramento County, California.

If the subject property is the "dominant Parcel" (the one benefiting from the easement), they include this statement following the legal description:

Together with an easement for ____________ purposes recorded on November 11, 1999, under Auditor's file No.____________, Records Sacramento County, California.

For a reservation, show "excepting therefrom and reserving to the grantor the right......etc" after the legal description.

For existing encumbrances, show "subject to a deed of trust from John D. Smith, in favor of First Union Bank, First American Title Co. as trustee, recorded on....etc."

For attachments to the document, "Attached hereto as Exhibit A and by this reference made a part hereof."

Signatures

The person who executes the document must have the "legal capacity" to do so.  They must be at least 18 years old (check your local requirements) and of sound mind.

A person signing with power of attorney signs the name of the grantor, followed by their own name, "as their attorney in fact."  Power of Attorney must be approved by the lender and title insurance company.  

There are separate notary acknowledgments for individuals, corporations, and attorneys-in-fact.  Many form document contain individual and corporate acknowledgments, but if one is obtaining signature, via power of attorney, a special acknowledgment for will be attached.

Recording 

The policy behind recording statutes is that title to real estate should be disclosed in public records and that purchasers of land should be able to rely on the status of the title as it appears in these records.  These statutes also provide that purchasers who abide by the rules and record their deeds prevail over previous grantees who did not record their deeds.

Documents are prepared for closing by the escrow agent, who completes a "closing order" form for the title company.  The closing order, along with executed acknowledged documents, are forwarded to the title company.  They, in turn, proceed as instructed.  If financing is involved, the closer instructs the title company to "hold" the documents, this gives the lender an opportunity to review the "funding package."  This funding package is prepared by the closer and sent to the lender for review at the same time the original documents are sent to the title company.  This is normally right after signatures have been obtained from both parties to the transaction.  The funding package contains copies of the original documents that are to be recorded, as well as the originals of the mortgage documents that are not recorded (i.e. the Note, and various other forms that are particular to a specific lender), and a copy of the "estimated settlement statement".

If the funding department's review find this documentation to be correctly prepared and signed ( a lender may hold up funding for a signature that is not consistent with the way the borrowers name has been typed - for example, leaving out a middle initial) - they will advise the closer to proceed with recording.  The closer then instructs the title company, and the documents are delivered to the county recorders' office.  The title company will phone the closer with "clearance" when the documents are formally recorded at the court house.  At that point, the funder releases funds and the escrow officer disburses them, per the escrow instructions.

The recorded will stamp each document with the date and time it is received and assign a recording number.  

Example of a Deed of Trust
This one is from the State of Washington

Below is only an example of what a Deed of Trust may look like.   The part at the bottom is where they will reconvey the deed once the loan is paid in full.

Deed of Trust

A deed of trust is similar to a mortgage contract except that a deed of trust involves a third party called a trustee, usually a title insurance company, who acts on behalf of the lender. When you sign a deed of trust, you are in effect giving the trustee title (ownership) of the property, but holding on to the right to use and live in it. The lender or trustee holds the original deed of trust until you repay the loan on your home. Unlike a mortgage, a deed of trust also gives the lender the right to foreclose on your property without taking you to court first.
Filed for Record at Request of

First American Title
P.O. Box 9999999
Somewhere, Washington 98555
(555) 555-5555 

Deed of Trust 


THIS DEED OF TRUST, made this _____ day of August, 1999, between ____________________ and
_________________________, husband and wife, Grantor whose address is __________________________,
Washington, and ____________ TITLE COMPANY, TRUSTEE, whose address is _________________________,
Washington, and _____________________________________________, husband and wife, Beneficiary, whose address is
____________________________, Washington _________. 

WITNESSETH: Grantor hereby bargains, sells and conveys to Trustee in Trust, with power of sale, the following described
real property in Madeup County, Washington:

(Full legal description typed in here) 

SITUATE IN MADEUP COUNTY, STATE OF WASHINGTON.

which real property is not used principally for agricultural or farming purposes, together with all the tenements, hereditament,
and appurtenances now or hereafter thereunto belonging or in any wise appertaining, and the rents, issues and profits thereof.

This deed is for the purpose of securing performance of each agreement of grantor herein contained, and payment of the sum of
__________________________ Dollars ($____________) with interest, in accordance with the terms of a promissory note
of even date herewith, payable to Beneficiary or order, and made by Grantor, and all renewals, modifications and extensions
thereof, and also such further sums as may be advanced or loaned by Beneficiary to Grantor, or any of their successors or
assigns, together with interest thereon at such rate as shall be agreed upon.

To protect the security of this Deed of Trust, Grantor covenants and agrees:

1. To keep the property in good condition and repair; to permit no waste thereof; to complete any building, structure or
improvement being built or about to be built thereon; to restore promptly any building, structure or improvement thereon
which may be damaged or destroyed; and to comply with all laws, ordinances, regulations, covenants, conditions and
restrictions affecting the property.

2. To pay before delinquent all lawful taxes and assessments upon the property; to keep the property free and clear of all
other charges, liens or encumbrances impairing the security of this Deed of Trust.

3. To keep all buildings now or hereafter erected on the property described herein continuously insured against loss by
fire or other hazards in an amount not less than the total debt secured by this Deed of Trust. All policies shall be held by
the Beneficiary, and be in such companies as the Beneficiary may approve and have loss payable first to the beneficiary
as its interest may appear and then to the Grantor. The amount collected under any insurance policy may be applied upon
any indebtedness hereby secured in such order as the Beneficiary shall determine. Such application by the Beneficiary
shall not cause discontinuance of any proceedings to foreclose this Deed of Trust. In the event of foreclosure, all rights of
the Grantor in insurance policies then in force shall pass to the purchaser at the foreclosure sale.

4. To defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or
Trustee, and to pay all costs and expenses, including cost of title search and attorney's fees actually incurred, as provided
by statute.


6. Should Grantor fail to pay when due any taxes, assessments, insurance premiums, liens, encumbrances or other
charges against the property hereinabove described, Beneficiary may pay the same, and the amount so paid, with interest
at the rate set forth in the note secured hereby, shall be added to and become a part of the debt secured in this Deed of
Trust. 


IT IS MUTUALLY AGREED THAT

1. In the event any portion of the property is taken or damaged in an eminent domain proceeding, the entire amount of
the award or such portion thereof as may be necessary to fully satisfy the obligation secured hereby, shall be paid to
Beneficiary to be applied to said obligation.

2. By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right to require
prompt payment when due of all other sums so secured or to declare default for failure to so pay.

3. The Trustee shall reconvey all or any part of the property covered by this Deed of Trust to the person entitled thereto,
on written request of the Grantor and the Beneficiary, or upon satisfaction of the obligation secured and written request
for reconveyance made by the Beneficiary or the person entitled thereto.

4. Upon default by Grantor in the payment of any indebtedness secured hereby or in the performance of any agreement
contained herein, all sums secured hereby shall immediately become due and payable at the option of the Beneficiary. In
such event and upon written request of Beneficiary, Trustee shall sell the trust property in accordance with the Deed of
Trust Act of the State of Washington, (as amended), at public auction to the highest bidder. Any person except Trustee
may bid at Trustee's sale. Trustee shall apply the proceeds of the sale as follows: (1) to the expense of the sale, including
a reasonable Trustee's fee and attorney's fee; (2) to the obligation secured by this Deed of Trust; (3) the surplus, if any,
shall be distributed to the persons entitled thereto or may be deposited (less clerk's filing fee) with the clerk of the
superior court of the county in which sale takes place.

5. Trustee shall deliver to the purchaser at the sale its deed, without warranty, which shall convey to the purchaser the
interest in the property which Grantor had or had the power to convey at the time of his execution of this Deed of Trust,
and such as he may have acquired thereafter. Trustee's deed shall recite the facts showing that the sale was conducted in
compliance with all the requirements of law and of this Deed of Trust, which recital shall be prima facie evidence of such
compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrances for value.

6. The power of sale conferred by this Deed of Trust and by the Deed of Trust Act of the State of Washington is not an
exclusive remedy; Beneficiary may cause this Deed of Trust to be foreclosed as a mortgage.

7. In the event of the death, incapacity, disability or resignation of Trustee, Beneficiary may appoint in writing a successor
trustee, and upon the recording of such appointment in the mortgage records of the county in which this Deed of Trust is
recorded, the successor trustee shall be vested with all powers of the original trustee. The trustee is not obligated to notify
any party hereto of pending sale under any other Deed of Trust or of any action proceeding which Grantor, Trustee or
Beneficiary shall be a party unless such action or proceeding is brought by the Trustee.

8. This Deed of Trust applies to, inures to the benefit of, and is binding not only on the parties hereto, but on their heirs,
devisees, legatees, administrators, executors, successors and assigns. The term Beneficiary shall mean the holder and
owner of the note secured hereby, whether or not named as Beneficiary herein.


9. This Deed of Trust shall be payable in full in the event of any sale or other transfers of premises by Grantor. 




_____________________________ ____________________________ 
(THE FOLLOWING IS USUALLY ON THE BACK SIDE OF THE DEED OF TRUST)

STATE OF WASHINGTON )
) ss.
COUNTY OF MADEUP )

On this day personally appeared before me _______________________________________ to me known to be the
individuals described in and who executed the within and foregoing instrument, and acknowledged that they signed the same as
their free and voluntary act and deed, for the uses and purposes therein mentioned.

GIVEN under my hand and official seal this _____ day of August, 1999.


__________________________________
NOTARY PUBLIC in and for the State
of Washington, residing at Tacoma.
My Commission Expires: _____________ 



REQUEST FOR FULL RECONVEYANCE

Do not record. To be used only when note has been paid.

TO: TRUSTEE

The undersigned is the legal owner and holder of the note and all other indebtedness secured by said Deed of Trust, has been
fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing to you under the
terms of said Deed of Trust, to cancel said note above mentioned, and all other evidences of indebtedness secured by said
Deed of Trust delivered to you herewith, together with the said Deed of Trust, and to reconvey, without warranty, to the parties
designated by the terms of said Deed of Trust, all the estate now held by you thereunder.

Dated _______________________, 19 ___


____________________________

____________________________

Mail Reconveyance to __________________________________________________, whose address is
___________________________________, Washington 98555.


Example of a Mortgage Note

Mortgage

If you can’t repay the loan on your home, a mortgage gives the lender the right to foreclose on the property and sell it to get back their money. A deed of trust serves the same purpose as a mortgage, however some states traditionally use one or the other - in some cases both, depending on the custom in each county. With a mortgage, the lender must go to court to foreclose on a property.

MORTGAGE NOTE

$ _______________________ ________________________________
(City) (State)

________________________________
(Date)


FOR VALUE RECEIVED the undersigned jointly and severally
promise(s) to pay to the order of ______________________________
________________________________________________________________
the principal sum of __________________________________________
($ _________ ) Dollars together with interest thereon from date
at the rate of _________ (____%) percent per annum until
maturity, said principal and interest being payable monthly on
the _______ day of each and every month in lawful money of the
United States beginning on the ____ day of ___________ 19 _____,
in monthly installments of _______________________________ ($
_________), and continuing thereafter until _______________, or
until said principal and interest have been paid in full, at 
________________________________________, or at such other place
as the holder hereof may designate in writing from time to time.

Each installment payment shall be credited first to the
interest then due, and the remainder to the principal.

This Note with interest is secured by a mortgage on real
estate, of even date herewith, made by the maker hereof in favor
of said payee.

Each maker and endorser severally waives demand, protest
and notice of maturity, non-payment or protest and all
requirements necessary to hold each of them liable as makers and
endorsers and, should litigation be necessary to enforce this
note, each maker and endorser waives trial by jury and consents
to the personal jurisdiction and venue of a court of subject
matter jurisdiction located in the State of ________________ and
County of ________________.

Each maker and endorser further agrees, jointly and
severally, to pay all costs of collection, including a reasonable
attorney's fee in case the principal of this note or any payment
on the principal or any interest thereon is not paid at the
respective maturity thereof, or in case it becomes necessary to
protect the security hereof, whether suit be brought or not.

This note is to be construed and enforced according to the
laws of the State of ______________; upon default in the payment
of principal and/or interest when due, the whole sum of
principal and interest remaining unpaid shall, at the option of
the holder, become immediately due and payable and it shall
accrue interest at the highest rate allowable by law from the
date of default. 

Default shall include, but not be limited to non-payment
of any respective installment within ten (10) days from the due
date set out herein, or payment dates on three different
occasions for any installments which are in excess of five (5)
days subsequent to the due date therefore set out herein.

Unless specifically disallowed by law, should litigation
arise hereunder, service of process therefore may be obtained
through certified mail, return receipt requested; the parties
hereto waiving any and all rights they may have to object to the
method by which service was perfected. 


_____________________________ ____________________________
Witness 

_____________________________ ____________________________
Witness

 

 


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