In Colorado, homeowners can use either a mortgage or deed of trust to secure the terms and conditions of a loan. A deed of trust requires three parties instead of two. Unlike with a mortgage, a trustee is appointed to hold the deed until the borrower pays the loan off or sells the home. Colorado law sets requirements for a deed of trust.
A trustee must be named on the deed of trust. The trustee is an independent third party who holds the property and deed of trust. Unlike most states that allow a title company to act as the trustee, Colorado requires a public trustee. The Colorado General Assembly established the office of the public trustee in each county to provide a system that ensures the rights of the borrower and the lender equally. The trustee is required to sign all necessary areas on the deed of trust to make it valid.
The promissory note is your signed acknowledgement of the debt and agreement to pay. A promissory note is legally binding. Although the deed of trust will reference the promissory note, they are two separate documents. The promissory note states the borrower's name and address, payee's name and payment location, acceptable payment methods, amount of payment, date payment is due and the date payment is considered late. The note must be signed and notarized.
Information in the Deed of Trust
Before signing a deed of trust, it is important to make sure all information is correct. Check for spelling errors or other discrepancies. A deed of trust contains the public trustee's name, borrower's names, name of the lender, property address, principal balance of the loan, interest rate, payment amount, maturity date of the loan, prepayment penalties and late fees.
If a borrower defaults on a deed of trust, the home will be foreclosed. In Colorado, a deed of trust contains a clause that grants the trustee the power of sale. When a borrower defaults, the lender begins the foreclosure procedure by filing a notice to foreclosure with the office of the public trustee in the county where the home is located. The trustee oversees the sale of the home through a public auction.