What is the purpose of a deed of trust in a mortgage?

The purpose of a deed of trust in a mortgage is primarily to convey title to a trustee, who holds it as security for the lender. This creates a security interest in the property, allowing the lender to have a claim to the property in case of default by the borrower. In a deed of trust, there are three parties involved: the borrower (trustor), the lender (beneficiary), and the trustee. When the borrower takes out a loan to purchase real estate, the property title is transferred to the trustee until the loan is paid off. This arrangement provides a mechanism for the lender to recoup their investment if the borrower fails to fulfill their repayment obligations.

This structure is particularly valuable because it allows for a non-judicial foreclosure process in many states, simplifying the procedure for the lender if the borrower defaults. Understanding this function is crucial for anyone studying real estate transactions or involved in mortgage lending.