Mortgage / Deed of Trust
The security instrument that pledges your property as collateral — understanding this document is essential to understanding how foreclosure works.
A Mortgage or Deed of Trust (the terminology varies by state) is the security instrument that pledges the property as collateral for the Promissory Note. It creates a lien on the property in favor of the lender, giving the lender the right to foreclose (sell the property) if the borrower defaults. In mortgage states (lien theory), the borrower retains title and the lender has a lien. In deed of trust states (title theory), legal title is conveyed to a trustee who holds it for the lender's benefit and can sell the property through non-judicial foreclosure. The document is recorded in the county land records, creating a public record of the lien. It typically contains: the legal description of the property, the borrower's covenants (promise to pay, maintain insurance, pay taxes, maintain the property), the lender's rights on default (acceleration, foreclosure, appointment of receiver), and state-specific provisions.
Purpose
- 1Create a security interest (lien) in the property to secure repayment of the Note
- 2Provide the legal mechanism for foreclosure if the borrower defaults
- 3Record the lender's interest in the public land records, giving notice to the world
- 4Define the borrower's obligations beyond payment: insurance, taxes, maintenance, occupancy
- 5Establish the framework for non-judicial foreclosure in deed of trust states
Who Prepares It
The original lender's attorney or closing agent prepares the Mortgage/Deed of Trust at loan origination. It is signed by the borrower (and often notarized) at closing and recorded in the county land records. The recording of the Mortgage is what perfects the lender's security interest against third parties.
When It Is Used
Created at loan origination and recorded immediately after closing. The Mortgage/Deed of Trust remains in effect until the loan is paid off and a Satisfaction/Release is recorded, or until foreclosure is completed and title passes to the purchaser. In foreclosure, the Mortgage/Deed of Trust is examined to verify: proper execution, proper notarization, proper recording, and that it secures the Note being foreclosed.
Legal Effect
The Mortgage/Deed of Trust creates a lien on the property. In a judicial foreclosure state, the lender must file a lawsuit and obtain a court order to foreclose. In a non-judicial foreclosure state (deed of trust), the trustee can sell the property without court involvement, following the procedures in the deed of trust and state law. The recording of the Mortgage establishes priority — first in time, first in right — among competing liens. A properly recorded Mortgage gives the lender priority over later-recorded liens.
Common Mistakes
Homeowner Rights
Other Security Instruments Documents
Deed of Trust
The security instrument used in non-judicial foreclosure states — a three-party instrument that allows a trustee to sell the property without court involvement.
Satisfaction of Mortgage
The document that releases the mortgage lien after the loan is paid in full — and what happens when the lender fails to record it.
FHA Security Instrument
The FHA-specific Mortgage or Deed of Trust that incorporates HUD regulations and provides unique borrower protections.
VA Security Instrument
The VA-specific Mortgage or Deed of Trust for veteran home loans — incorporating unique SCRA protections and VA servicing requirements.
Condominium Rider
The Fannie Mae/Freddie Mac rider for condominium mortgages — incorporating HOA provisions, project assessments, and insurance requirements.
PUD Rider (Planned Unit Development)
The Fannie Mae/Freddie Mac rider for PUD mortgages — addressing HOA dues, community amenities, and association governance.
USDA Mortgage Documents
The USDA-specific mortgage instruments for Rural Development loans — incorporating RD regulations and providing unique loss mitigation options.
Frequently Asked Questions
What is the difference between a Mortgage and a Deed of Trust?▼
In a Mortgage state (lien theory), the borrower retains title and the lender has a lien — foreclosure requires a judicial process (lawsuit). In a Deed of Trust state (title theory), legal title is transferred to a trustee who holds it for the lender — the trustee can foreclose without court involvement (non-judicial foreclosure) by following the power of sale in the deed of trust. About 20 states are judicial (mortgage), about 30 are non-judicial (deed of trust). Your state's classification determines your foreclosure process.
What happens to a Mortgage when the Note is transferred?▼
Under the common law rule, 'the mortgage follows the note' — when the Note is properly transferred, the Mortgage automatically follows as an incident of the debt. No separate assignment of the Mortgage is necessary FOR EQUITABLE TRANSFER. However, for RECORD TITLE purposes (so the public land records show the correct party), an Assignment of Mortgage should be recorded. An unrecorded assignment may create issues with chain of title, notice, and standing.
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