In Texas, the legal instrument used to secure obligations on real property is known as the deed of trust. The deed of trust is very similar to a mortgage. With a deed of trust, an individual or entity borrows money from a lender to purchase real property, such as a house. The lender and borrower execute a deed of trust in which the lender is the beneficiary and the borrow is the obligor. A trustee must also be appointed. The trustee collects the monthly loan payments and is also responsible for conducting a foreclosure sale, if necessary.
In Texas, the trustee is specifically appointed within the deed of trust document. Usually, the beneficiary of a deed of trust chooses the trustee. Technically, a trustee can be any individual or entity that is willing to serve in that capacity. However, institutional lenders usually only appoint companies that specialize in trustee services. The powers of the trustee may be specifically set forth within the deed of trust, such as the power to sell the property if the loan is in default.
Powers and Duties
The trustee of a deed of trust in Texas has several powers and duties. Generally, all deeds of trust give the trustee the power of foreclosure. In Texas, the trustee can sell the property through non-judicial foreclosure. This means that the property can be sold without the intervention of a court. The terms of foreclosure will be set forth in the deed of trust. The trustee is also usually required to collect the monthly payments from the borrower, on behalf of the lender.
A deed of trust is related to but quite different from a mortgage. Mortgages are rarely used in Texas. In a mortgage, the lender acquires a lien on your home in exchange for a loan. It is a two-party transaction. Thus, no trustee exists in a mortgage. Furthermore, the remedy for lenders with a mortgage is judicial foreclosure. This means that the lender must file a lawsuit to foreclose on a property if there is a mortgage.
Discharge of Trustee
Deeds of trust often contain provisions regarding the termination and appointment of a new trustee by the lender. These provisions protect the lender in the case that the trustee does not live up to its expectations. If the lender exercises its rights under these provisions, a new trustee may be appointed. The trustee will also be discharged if the loan is paid in full. In that case, the debt will have been satisfied and the rights of the trustee expire.
- "Texas Real Estate Law"; Charles J. Jacobus; 2008
- "Real Estate Law"; James Karp, et al.; 2005
- "Secured Transactions: Examples & Explanations"; James Brook; 2007