Deeds of Trust

Notes and Deeds of Trust

Part 2 – The Basic Facts About Deeds of Trust

A “Deed of Trust”, or “Trust Deed”, is the document that secures a loan on a piece of property. The Deed of Trust and the secured Note go hand-in-hand and the Deed of Trust is not valid without the Note. (Check our Notes page for all the basic facts)

In an escrow transaction, the Escrow Holder may be requested to prepare the Trust Deed together with the Note if the Lender is a private party who does not have the forms or the expertise to do so. Be sure you consult with your legal counsel once these forms are prepared.

There are two basic types of Deeds of Trust, the Long Form and the Short Form. The Long Form, which could be 20-30 pages long, is the one used by institutional lenders. The Short Form is the one that is most usually prepared by your Escrow Officer. The reason it is “Short” is because the clauses and conditions that appear as standard in the Long Form are incorporated in one document and recorded in all the California counties. By referencing the recorded instrument numbers on the document, the Short form assures that all the rights and obligations of the parties under law and as shown on the Long Form are preserved.

There are three parties, all of which have to be legal entities **, in a Deed of Trust drawn up according to California’s laws:

  • The “Trustor” is the person who borrowed the money (the Payor of the Note)
  • The “Beneficiary” is the person who is lending the money (the Payee of the Note)
  • The “Trustee” is the neutral 3rd party who will issue the release of the loan once it is paid in full

** Legal entity – an entity whose existence is recognized under State and Federal laws. Example – a natural person or an incorporated organization.  Not a legal entity – dbas, Fido, your French poodle.

Whichever type of Deed of Trust is being used there are certain requirements that must be incorporated into this instrument. It must:

  1. Be in writing
  2. Have an amount which matches the amount on the Note(s)
  3. Have a date which matches the date on the Note(s)
  4. Have a complete legal description of the property(s) being encumbered (street address only is not sufficient)
  5. Have the name of the Beneficiary and it must match exactly the name of the Payee on the Note(s)
  6. Have the name of the Trustor and it must match exactly the name of the Payor on the Note(s)
  7. Have the name of the Trustee and the name must match exactly the name of the Trustee on the Note(s)
  8. Have an address for the Trustor for mailing notices in case of default
  9. Have a good return address for Beneficiary for mailing the document back after recording
  10. The instrument must be signed by the Trustor and notarized

If there are certain conditions that have been negotiated between parties and incorporated into the Note, some of them also have to appear on the Deed of Trust to give constructive notice. Those are:

  • Due on sale clause – the loan must be paid in full if property transfers ownership
  • Subordination clause – allows this loan to be subordinated to a new loan to be made in the future
  • Partial Release provisions – partial reconveyance in the event of partial payoff
  • Cross collaterization – for loans that are secured on more than one piece of property

Like the Note, the Escrow Officers may prepare the Deed of Trust but it is up to the client to obtain their own independent legal counsel to review the final documents to make sure that they properly reflect the agreement between all parties.

The Short Form Deed of Trust form can be found on our website under our “For Your Convenience / Forms section”: http://www.vivaescrow.com/for-your-convenience/forms. It is important that you seek your legal and financial counsel with respect to all conditions and preparation of the Note and the Deed of Trust, in and outside of an escrow transaction.

First question: “What is a Note?” http://www.vivaescrow.com/for-your-convenience/faq/notes

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  1. Ling Lee

    I recently found out there is a lien on my property. But the deed of trust and note only signed by my husband.
    I didn’t aware of that and I’m on the title of the property. So , what will happen? how can I do? if i sold the property do I paid for it or only my husband pay for it? If I keep the property, can they sue me or pay to them? is this kind of lien legally entitle to my property?

    • Juliana Tu

      If you and your husband own the property and your husband signed a Note and Deed of Trust by himself and put that on the property, you could conceivably be also liable for this loan. Your husband can legally encumber his share of the property, but usually the Lender will ask that you as the co-owner, be notified and join him in signing at least the Deed of Trust, so that you acknowledge that he is borrowing on the property. I am not sure why this lender did not. If you sell the property you will need to address the issue of who will pay this lien, whether it comes from your part of the proceeds or your husband’s only, or from both of you. You will need to work that out.

      If you do not sell the property and you don’t pay this lien, the Lender could foreclose on the property and that will affect you.

      Please contact an attorney as to what your rights and obligations are.

  2. Cynthia Robinson

    My mother passed away without a will. I went through probate. And now own the home. I was told by the title company that I need a deed. There is no note or loan being transferred. I am not sure who the parties are. I’m the beneficiary I think but who are the the others? I appreciate your help.

    • Juliana Tu

      When you go through probate the Executor of your mother’s estate would do a deed granting the property to you as the Beneficiary of the estate. Please ask the attorney who handled the Probate about getting the property put under your name.

  3. Marie Anton

    To Pamela,
    I’ve also had the same situation as yours, so I wonder who is trying to help on this? There are some that are really scary to believe if we are not aware of the laws. One advocacy told me that “lender didn’t sign the document”, but does it really matter? just like you said do we really have any legal recourse? Were you also approach by this company?

  4. maniyarasu

    property address is matched but legal description doesn’t match compare to full value deed.. In this case mortgage is open or not for our property? please give a solution… asap…

  5. pamela

    Is a deed of trust valid if the lender (beneficiary) did not sign? We were given legal advice stating that there were errors in our deed of trust. Specifically, your lender violated Title 42 USCS 1986 (Action for neglect to prevent), FRPC 9B (Fraud by a confession), Title 18 USCS Section 1001 & 1002 (False statements, concealment), Title 16 USCS 1692E (Fraud & Misleading Statements), Title 15 USCS 78FF (False & Misleading Statements Penalty). Do we really have any legal recourse?
    thanks so much,
    Pamela

    • Juliana Tu

      Your question as to the legality of your deed of trust because there were errors in it is one that has legal consequences. We are a settlement services company and not allowed to practice law. You said that you were given legal advice regarding this matter. I would strongly recommend that you obtain your own legal counsel and not rely on someone else’s legal counsel. By the way, a Deed of Trust is never signed by the Lender. It is only signed by the Trustor – the person who owes the money.

      We regret that we can’t answer your question as to whether you have legal recourse in your case.

  6. Jennie McNamara

    My mother in law holds the note/deed of trust for our property and wishes to cancel the deed of trust/note so the house is ours without further payment. Basically, she is gifting the house to us prior to her passing. How can this be done?

    • Juliana Tu

      Let me first qualify my answer to your question by stating that we are a settlement services/escrow company in California, and most of our transactions are for handling properties in this state. Other states have different laws, rules, regulations and standards of practices that I cannot comment on. If you are from a state other than California, you should ask your question of closing professionals or closing attorneys in your state.

      To cancel/reconvey a Note and Deed of Trust the Beneficiary (your mother-in-law) would hand you the following:

      The original Note and the original Deed of Trust
      She would sign on the back of the Deed of Trust where it says “Request for Full Reconveyance”
      You would submit these 2 documents to the Trustee (you can see who the Trustee is on the face of the Note and the Deed of Trust)
      You will include the fee that the Trustee would charge

      I suggest you contact the Trustee and get their address and their fee cost. Send it all by registered mail.

      Once the Trustee issues the “Full Reconveyance” they will send this form to you.
      Finally, the last step is that you will send this original Full Reconveyance document to the County Recorder’s office where the property is located along with the recording fee.

      Hope this helps!

  7. patrick brady

    if a reciever brings a mortgage holder to court wishing to foreclose does the deed of trust have to be produced in court as a validation of claim

    • Juliana Tu

      Thank you for leaving a question on our Viva Escrow website. Please note that my answer(s) are given in the context that the property is in the State of California only. Other states have different regulations.

      Normally when a loan is not being paid and foreclosure is imminent, the mortgage holder or “Beneficiary” submits the original Note and the original Trust Deed to the Trustee/foreclosure company (nonjudicial foreclosure) or the court (judicial foreclosure). If the deed of trust cannot be found, you can get a certified copy of the deed of trust from the County Recorder’s office to show that there is indeed a lien on the property.

  8. GERALD EGBASE

    Do I need a formal agreement with your entity to use your entity as a Trustee on a Deed of Trust between Trustor and Beneficiary.

    • Juliana Tu

      Thank you for leaving your question on Viva Escrow’s website.

      There is no need of a formal agreement with any entity to use them as Trustee on a Deed of Trust. Just naming them in the Note and the Deed of Trust will do the trick. However, we do, of course, recommend that the entity be aware of the responsibilities and duties of being the Trustee. One of those is the responsibility to proceed with a foreclosure of the Deed of Trust if that becomes necessary.

      As a Trustee, Viva Escrow will be the entity to go to when the Note is paid in full and a reconveyance must be issued. However, if the Note must go to foreclosure then we would ask that the Beneficiary re-assign the Trusteeship to a company who is in the business of conducting foreclosures through a “Substitution of Trustee” form. There are certain companies out there which promote their foreclosure services and most title fompanies also have the proper departments to handle it. We at Viva Escrow do not, as we are mainly in the settlement services area of the industry.

      Again, thank you.