Thomas F. Miles, Attorney and Counselor at Law
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What's the difference between a deed of trust and a mortgage?

Like other states in the West, California relies heavily on what are called deeds of trust when it comes to making sure a bank or other institution has collateral necessary to make a home loan. Although mortgages are also permitted in California, banks tend to prefer the deed of trust option.

In practice, both a deed of trust and a mortgage serve the same purpose, which is to give the bank a legal option for taking back a home if the homeowner is unable to pay back the bank's loan. Getting the home covers at least some of the banks lost income from the loan that did not work out in the bank's favor.

However, in the case of a mortgage, the deed to the property remains in the name of the person borrowing the funds, and the bank records a mortgage on the property, giving the bank a lien. If the bank needs to foreclose, the bank has to go to court to get an order giving it leave to do so.

A deed of trust, on the other hand, involves a trustee receiving a deed to the property on behalf of the creditor. The trustee's deed gives the trustee the power to sell the property in question if the borrower defaults. While there are some legal notice requirements and other procedures a trustee must undertake before selling the property, there is no need for a court order. Instead, it is on the borrower to go to court to stop a sale if he or she has grounds for doing so.

What this means for Californians who have given over a deed of trust is that they need to pay careful attention if they start getting behind in their loan payments on their house. Otherwise, the bank can catch them unaware and take their property, as they will not necessarily get a day in court to defend themselves. It is advisable for a San Diego family who is in financial trouble to consult with a qualified attorney for foreclosure assistance.

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