A trust deed (synonymous
with deed of trust
) is a document involving three parties that acts as security for a loan. It is a common tool
for securing a home loan.
It basically works like so: The three parties involved are the trustor, the trustee and the beneficiary. The Trustor is the person who will own the house once the money is lent, the borrower. Title to the house is in their name, despite the fact that they owe up to 90% of the value of the property. The trustee is the person who holds the deed, an impartial third party, typically an escrow company. The beneficiary is the person who benefits from the trust, the person who stuff goes to after a certain occurance, just like a trust fund for someone (the beneficiary) when they hit a certain age. The beneficiary in the case of a trust deed is the lender, the person or institution that the property goes to in the event of default, for example, if the borrower fails to make their monthly loan payments.