Participants under a trust deed

A trust deed is a security device which imposes a mortgage lien on real estate. The mortgage wording purports to create a fictional trust which is said to “hold title” to the mortgaged real estate for the benefit of the mortgage holder.

As you will observe, the trustee holds no interest in the property and has no duty owed to anyone, until they voluntarily undertake to reconvey or foreclose on a declaration by the mortgage holder.

Thus, a mortgage has three parties:

  • at least one trustor (the owner(s) of the mortgaged real  estate);
  • a trustee who need not be named; and
  • at least one beneficiary (a lender, carryback seller,  HOA, bonded assessment or other lienholder with a trustee’s sale provision).

The trustee’s sale is conducted by the trustee who is either:

  • named in the mortgage; or
  • appointed by the beneficiary of the mortgage at the time the beneficiary initiates the foreclosure process.

A broker, attorney, mortgage servicer, subsidiary of the mortgage holder, or the mortgage holder itself may be appointed at any time as the trustee.

Generally, trust deed forms are prepared and distributed by title or escrow companies naming their corporation as the trustee. However, a trust deed or other security device does not need to name the trustee at all. The mortgage holder later simply appoints a trustee to handle the NOD or reconveyance. [See RPI Form 450]

Also, the mortgage holder may appoint a substitute trustee to replace the trustee named in the trust deed.