A deed of trust is an agreement formed between a buyer of real estate, a lender financing the purchase, and a neutral third party called the trustee. The deed of trust acts as security for a promissory note, a form that establishes the borrower’s obligation to pay back the loaned amount in full.

If the borrower defaults on the loan, the trustee will have the right to foreclose the property and sell it at auction in order to clear the default. In most states that recognize them, deeds of trust enable the foreclosure to bypass the judicial process which is ordinarily required under a mortgage. Judicial foreclosures can be a significant inconvenience for lenders, making deeds of trust the preferable arrangement where permitted.

Deeds of trust are currently permitted in thirty-seven (37) states.

By State (37)

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Georgia
• Idaho
• Iowa
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Mexico
• New York
• North Carolina
• North Dakota
• Oklahoma
• Oregon
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

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Contents By State (37) What is a Deed of Trust? Who can act as the Trustee? Deed of Trust vs. Mortgage Power of Sale Clause Deed of Trust Laws Frequently Asked Questions (FAQ)

What is a Deed of Trust?

A deed of trust, or “trust deed,” is an agreement in which a lender and a borrower agree to have a trustee hold onto the title until the loan is paid off. The deed of trust acts as collateral/security for the promissory note(s) signed between the parties.

The “trust” part of the deed refers to the fact that the legal title to the property is held by the trustee, and will only be only released to the borrower once the loan has been repaid.

Who can act as the Trustee?

While some states have requirements for who can act as a trustee, the trustee is typically one (1) of the following individuals/entities:

• A title insurance company
• An entity (such as an LLC)
• An attorney
• A financial institution (e.g., a savings bank or credit union)

Depending on the agreement between the lender and borrower, both parties may have the privilege of choosing the trustee together. Alternatively, the lender may reserve the full right to choose a trustee on their own.

Deed of Trust vs. Mortgage

While both deeds of trust and mortgages are used for lending, they have a few key differences, namely the following points:

• Foreclosure process – With a mortgage, the lender often has to file a lawsuit against the homeowner after default occurs. With a deed of trust, the foreclosure process is significantly faster, as it only involves the requirements set out in the deed of trust form and the state’s statutes. See the “Power of Sale” clause below for more information.
• Number of parties – Mortgages only involve the borrower and the lender. Deeds of trust on the other hand involve the borrower, the lender, and the trustee.

Power of Sale Clause

Most deeds of trust contain an essential provision called the “power of sale” clause. This clause allows the lender to go through a non-judicial foreclosure should the borrower default on the loan. Without the clause, the lender would need to go through court proceedings to take possession of the property, which is standard for mortgage agreements. Generally speaking, if a state permits power of sale clauses, they’ll also allow deeds of trust, although there are some exceptions to this rule.

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Deed of Trust Laws

The following table contains the statutes pertaining to deeds of trust and power of sale for each state. If a state shows “N/A,” power of sale foreclosures are not offered in the state.

STATE	PERMITTED?	STATUTES
Alabama	Yes	§§ 35-10-11 to 35-10-16, § 35-10-3
Alaska	Yes	§§ 34.20.070 to 34.20.135
Arizona	Yes	§§ 33-801 to 33-821
Arkansas	Yes	§§ 18-49-101 to 18-49-106, § 18-50-103
California	Yes	§§ 2920 – 2944.10
Colorado	Yes	Article 38 & Article 39
Connecticut	No	N/A
Delaware	No	N/A
Florida	No	N/A
Georgia	Yes	§§ 44-14-120 to 44-14-126, § 44-5-33
Hawaii	Yes	§§ 506-1 to 506-10
Idaho	Yes	§§ 45-1502 to 45-1515
Illinois	No	N/A
Indiana	No	N/A
Iowa	Yes	Ch. 654
Kansas	No	N/A
Kentucky	No	N/A
Louisiana	No	N/A
Maine	Yes	§ 6203-A
Maryland	Yes	§§ 7-101 to 7-113
Massachusetts	Yes	§§ 244:1 to 244:41
Michigan	Yes	§§ 600.3201 to 600.3285
Minnesota	Yes	§§ 582.01 to 582.32
Mississippi	Yes	§§ 89-1-53 to § 89-1-59, § 89-1-63
Missouri	Yes	§§ 443.005 to 443.454
Montana	Yes	§§ 71-1-201 to 71-1-235
Nebraska	Yes	§§ 76-1001 to 76-1018
Nevada	Yes	§§ 107.015 to 107.560
New Hampshire	Yes	§§ 479.22 to 479.27-a
New Jersey	No	N/A
New Mexico	Yes	§§ 48-10-1 to 48-10-21
New York	No	N/A
North Carolina	Yes	§§ 45-4 to 45-107
North Dakota	No	N/A
Ohio	No	N/A
Oklahoma	Yes	§§ 46.40 to 46.49
Oregon	Yes	§§ 86.705 to 86.815
Pennsylvania	No	N/A
Rhode Island	Yes	§§ 34-27-1 to 34-27-5
South Carolina	Yes	§§ 29-3-10 to 29-3-800
South Dakota	Yes	§§ 21-48-1 to 21-4-26
Tennessee	Yes	§§ 35-5-101 to 35-5-116
Texas	Yes	§§ 51.0001 to 51.016
Utah	Yes	§§ 57-1-1 to 57-1-46
Vermont	Yes	§§ 4691 to 4670
Virginia	Yes	§ 55.1-316 to § 55.1-345
Washington	Yes	§§ 61.24.005 to 61.24.190
West Virginia	Yes	§§ 38-1-1 to 38-1-17
Wisconsin	No	N/A
Wyoming	Yes	Title 34, Ch. 3 & Ch. 4