A deed of trust, or “trust deed,” secures a loan by temporarily transferring the legal title of the borrower’s real estate to a neutral trustee. If the borrower defaults, meaning they haven’t fulfilled their loan obligations, the trustee can sell the property to recover the lender’s balance.

During the loan term, the borrower retains equitable title and may continue using their property. Upon repayment, the trustee releases the legal title to the borrower.

While both deeds of trust and mortgages are used for securing loans, they have a few key differences:

• Foreclosure – Mortgages usually require lenders to file a lawsuit to foreclose. In contrast, a deed of trust allows for a quicker resolution, as many states permit non-judicial foreclosures (see “Power of Sale Clause” below for details).
• Number of parties – A mortgage involves only two parties: the borrower and the lender. A deed of trust adds a third party: the trustee.

Most deeds of trust include a “power of sale” clause that enables a non-judicial foreclosure if the borrower defaults. States that allow power of sale clauses generally permit deeds of trust, though some exceptions apply.