If you've bought a house, you got some type of deed when it transferred the property from one party to you. Trustee deeds -- also called deeds of trust -- aren't mortgages, even though the two terms are often used interchangeably. A mortgage has two parties: a borrower and a lender. A trustee deed has three: a borrower, lender and trustee. The easiest way to spot the difference is to look at the foreclosure process under each.
Imagine buying a dream house, and then have someone turn up later claiming to be the real owner. A warranty deed protects you from such a scenario. Warranty deeds include the seller's promise that he owns the property free and clear, and the land isn't tied up in anything that might interfere with ownership rights. These deeds also come with the extra protection of a title insurance policy.
If your property has passed through several owners, you could never know about past problems like unpaid taxes or paperwork mistakes. Title insurance protects you from problems that can crop up once a house is officially yours. If you're like most people, you had to take out a mortgage when you bought your home. Mortgage lenders require buyers get a title insurance policy, which becomes part of your warranty deed.
The type of deed you get depends largely on where you live. As of 2013, trustee deeds are used in place of mortgages in over half the states. In states that allow both, lenders tend to choose deeds of trust. Having a trustee gives them an advantage in the event of foreclosure.
If you own your home through a trustee deed and stop making payments, the foreclosure process might happen much faster than you anticipated. Because the home is held in trust, the trustee -- usually a bank -- can foreclose without going to court. These non-judicial foreclosures can take as little as 30 days. By contrast, if a mortgage lender wants to foreclose, it must file a lawsuit. As a result, a mortgage foreclosure can take several months to a year.
- Bankrate.com: Understanding Quitclaim Deed, Warranty Deeds on Property
- The Mortgage Professor: Questions About Title Insurance
- Cornell University Law School: Deed of Trust
- CNN.com Money: Most Ruthless Foreclosure States
- California Civil Code § 2924
- National Law Review: No Need to Record an Assignment of a Deed of Trust Prior to Foreclosure
A.M. Hill has been a licensed attorney since 2004. Her practice areas include family law and divorce, probate and estate planning and bankruptcy. Hill holds a Juris Doctor from the Cleveland-Marshall College of Law.