Technically, a mortgage doesn't have a trustee or a beneficiary. Another type of document for mortgage loans does, however. It's called a deed of trust and it's similar to a mortgage, unless and until you default on the loan. Fourteen states use deeds of trust rather than mortgages. If you live in California, Alaska, Colorado, Idaho, Mississippi, Montana, Texas, West Virginia, Virginia, North Carolina, Missouri, Illinois, Georgia or Arizona, you probably have a trustee and beneficiary, not a mortgagee.
The trustee of a deed of trust isn't involved in the exchange of funds so you can buy your house. That's between your home's seller and your mortgage lender when the lender makes you the loan. You then sign the deed of trust, promising to pay the loan back. The trustee's role is to make sure you do. The trustee is usually a professional entity, such as an escrow company or a title company, not an individual. It takes possession of the title to your home and holds on to it for safekeeping until you fulfill the terms of the loan agreement and pay the property off.
The beneficiary of a deed of trust is your lender. With a traditional mortgage, the lender would act as watchdog over your payments itself, ensuring that you make them on time and beginning foreclosure proceedings if you don't. With a deed of trust, the beneficiary effectively entrusts the the dirty work – the job of foreclosure – to the trustee.
You – or the person who borrowed the money from the lender – are the trustor of a deed of trust. The deed places your home in your care and control. You get to live there as long as you make the loan payments and you're responsible for its upkeep and repair, just as you would be with a mortgage. When you pay your loan off, the trustee will reconvey title to the home to you and you own it, but in the interim, the trustee holds title.
The trustee is something of a silent partner in the whole transaction unless or until you default. If you do, the beneficiary can send you a notice of foreclosure and sic the trustee on you without going to court to get a judge's permission first. This is a so-called non-judicial foreclosure. You'll have a short period of time to bring your loan payments current. If you fail to do so, the trustee can auction off your home. If this occurs, the trustee turns title to the property – as well as the money from the sale – back to the beneficiary or lender. This is both better and worse than a regular mortgage foreclosure. With a deed of trust, the lender can't sue you for the money if your home sells at auction for less than you owe. However, the foreclosure is final. You have no period of time to redeem it or buy your home back after the sale, as you would if you had a mortgage instead of a deed of trust and the lender foreclosed through the judicial process.
- Who Holds the Deed to the Property When a Satisfaction of Mortgage Is Filed?
- Can a Trustee Change in Foreclosure?
- Can a Family Member Add You to an FHA Mortgage by a Quitclaim Deed?
- What Is a Lien on the Property That Secures the Promise to Repay a Loan?
- Removing Real Estate From a Revocable Trust
- How to Put My House in a Trust