Chapter 10: Deed of Trust (Mandatory) As you recall, Chapter 9 provided a broad view of the mortgage deed process and role of a promissory note. Chapter 10 expands the discussion to include the importance of a deed of trust. Nineteen states plus the District of Columbia use the Deed of Trust as the customary security instrument in the sale of real estate. YOUR ANSWER NEEDS TO INCLUDE AN UNDERSTANDING OF “TITLE THEORY”. What is the practice in your home state? Assume you are a mortgage lender, would you prefer to use the Deed of Trust? Justify.

                                                    A deed of trust

A deed of trust is typically considered as an agreement between a lender and a borrower in giving the property to a neutral third party who will in turn act as a trustee who strategically holds the given property until that time the borrower completes paying off the debt (Ghent, 2013). During the time of repayment, the borrower keeps the original title of the property and holds the entire responsibility for the property, unless expressly mentioned otherwise in the deed of trust. On the other note, title theory is consequently considered as a doctrine of property law that a mortgagee transfers approved title of the premise to the mortgagee who will hold it until that time mortgagee has been fulfilled. It is, however, few states within America that have adopted the title theory also known as title states or title theory jurisdictions.

However, in California; there is the use of lien theory where a buyer typically holds the deed of his or her home throughout the time of the mortgage (Ghent, 2013). In any lien theory state, the lease operates as a lien against the home and the buyer owns the title to the house and once he or she has accomplished the mortgage, the lender removes the claim. As a mortgage leader, I would prefer to use the deed of trust as it accompanied by other essential documents including the prom note to be the most significant. Also, all transactions engaging deeds of trust are well structured which makes make it practical and necessary to use in such an agreement.

Reference

Ghent, A. (2013). America’s mortgage laws in historical perspective. In Unpublished working paper. Arizona State University Phoenix, AZ.