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Mortgage restructuring Group therapy Economist
Source:
Types of Mortgage
Instruments
Two types of mortgage instruments are used in the United States: the mortgage
(sometimes called a mortgage deed) and the deed of trust.
The mortgage
In all but a few states, a mortgage creates a lien on the title to the mortgaged
property. Foreclosure of that lien almost always requires a judicial proceeding
declaring the debt to be due and in default and ordering a sale of the property
to pay the debt.
The deed of trust
The deed of trust is a deed by the borrower to a trustee for the purposes of
securing a debt. In most states, it also merely creates a lien on the title and
not a title transfer, regardless of its terms. It differs from a mortgage in
that, in many states, it can be foreclosed by a non-judicial sale held by the
trustee. It is also possible to foreclose them through a judicial proceeding.
Most "mortgages" in California are actually deeds of trust. The effective
difference is that the foreclosure process can be much faster for a deed of
trust than for a mortgage, on the order of 3 months rather than a year.
Deeds of trust to secure repayments of debts should not be confused with
deeds to trustees to create trusts for other purposes, such as estate planning.
Though there are superficial similarities in the form, many states hold deeds of
trust to secure repayment of debts do not create true trust arrangements.
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