Deed of Trust vs Mortgage: Differences, Foreclosure and What It Means in Texas and Arizona
A mortgage has two parties. A deed of trust adds a trustee with a power of sale. How the two differ, and what the Texas and Arizona statutes say about sales.
Quick answer
A mortgage is a two-party security instrument between borrower and lender. A deed of trust adds a third party, a trustee, who holds the property as security and can sell it after a default. Texas and Arizona records show deeds of trust, and a release or reconveyance closes them, not a payoff alone.
What is a deed of trust, and how is it different from a mortgage?
The Legal Information Institute describes a deed of trust as a type of secured real-estate transaction that some states use instead of mortgages. It involves three parties: a lender, a borrower and a trustee. The borrower signs one or more promissory notes in exchange for the money, and as security for the notes transfers an interest in the real property to the trustee (Legal Information Institute, deed of trust).
A traditional mortgage has only two parties, the borrower and the lender, and the lender usually enforces it through a lawsuit. The practical difference for anyone reading property records is small: both instruments are recorded, both are liens against the property, and both must be released once the debt is paid.
The difference that matters is what happens on default, and what has to be recorded to close the lien afterward.
Definition
Deed of trust — A security instrument in which a borrower conveys an interest in real property to a trustee, as security for a loan owed to a lender. If the borrower defaults, the trustee can act on the lender's behalf.
Deed of trust vs mortgage, side by side
The table summarizes the typical differences. State law fills in the details, and the next sections show what Texas and Arizona statutes say.
| Mortgage | Deed of trust | |
|---|---|---|
| Parties | Borrower and lender | Borrower, lender and a trustee |
| Who holds the security interest | The lender, as mortgagee | The trustee holds it for the lender's benefit |
| Typical enforcement | Court foreclosure | Sale by the trustee under a power of sale, or court foreclosure if the lender chooses |
| Who the borrower is called | Mortgagor | Trustor or grantor |
| What closes it of record | A recorded satisfaction or release of mortgage | A recorded release, or a reconveyance by the trustee |
Deeds of trust in Texas
Texas lenders use deeds of trust. The recording statute lists both: a conveyance, "mortgage or deed of trust" that is not recorded is void against a creditor or later buyer for value without notice (Tex. Prop. Code 13.001). That is why a deed of trust has to be recorded in the county real property records to protect the lender.
Texas also sets the rules for a sale under the power of sale. Under Tex. Prop. Code 51.002, a sale under a deed of trust "must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month," at the county courthouse in the area the commissioners court designates (Tex. Prop. Code 51.002).
Notice must be given at least 21 days before the sale by posting at the courthouse door, filing a copy with the county clerk and serving the debtor by certified mail. For a home, the servicer must first give the debtor a written default notice with at least 20 days to cure before a notice of sale can be given. Those notices are public: a filed notice of sale in the county clerk's records is a sign that a property is headed for a foreclosure sale.
For a Harris County home, a search should therefore show the deed of trust, any substitute trustee deed, and the release of lien. See title search in Harris County, Texas for what HeritageDeed searches there.
Trust deeds in Arizona
Arizona calls the instrument a trust deed or deed of trust and the borrower the trustor. The statute defines "trust deed" as "a deed executed in conformity with this chapter and conveying trust property to a trustee or trustees qualified under section 33-803 to secure the performance of a contract or contracts" (A.R.S. 33-801, definitions). The beneficiary is the person for whose benefit it is given, which is the lender or its successor.
The statute gives the trustee a power of sale. It also lets the lender choose another route: "At the option of the beneficiary, a trust deed may be foreclosed in the manner provided by law for the foreclosure of mortgages on real property" (A.R.S. 33-807, sale of trust property). If a court foreclosure is filed, a sale under the power of sale is not held unless that action is dismissed.
Timing is built in. The same section says the power of sale "shall not be exercised before the ninety-first day after the date of the recording of the notice of the sale." So a recorded notice of trustee's sale in Maricopa County gives at least that period before a sale can occur.
For the Phoenix area, see title search in Maricopa County, Arizona. For other liens recorded there, see Maricopa County lien search.
Texas and Arizona compared
Both states put a trustee in the middle. These are the points a records search will touch:
| Point | Texas | Arizona |
|---|---|---|
| Common instrument | Deed of trust | Trust deed or deed of trust |
| Statute defining the sale process | Tex. Prop. Code 51.002 | A.R.S. 33-807 and related sections |
| Sale timing rule | First Tuesday of a month, 10 a.m. to 4 p.m. | Not before the 91st day after the notice of sale is recorded |
| Notice to the debtor | Certified mail at least 21 days before the sale, after a 20-day cure notice for a residence | Notice of sale recorded; see A.R.S. 33-808, notice of trustee's sale |
| Court foreclosure possible? | Not covered by the statute sections read for this article | Yes, at the beneficiary's option (A.R.S. 33-807) |
How to read a deed of trust in a title search
Identify the borrower, the lender and the trustee
The borrower's name should match the current owner. The lender is the party being paid.
Note the recording date and number
This gives the lien its priority. Later liens recorded after it generally rank behind it.
Look for assignments
Loans are sold and servicing moves. An assignment changes who holds the note. It does not close the lien. For the same trap on mortgages, see Is That Mortgage Actually Open?.
Look for a release
A recorded release of lien or a reconveyance that references the deed of trust closes it. A loan with no release is open until someone shows otherwise.
Check for notices of default or sale
A recorded notice of sale or a lis pendens means the lender has started enforcement. Read the date against the statutory timing above.
Not the same as a deed, and not the same as a deed in trust
What a records search cannot tell you
Where a title search fits
HeritageDeed reads the recorded deeds of trust and releases for Harris County, Texas and Maricopa County, Arizona, among other counties: $49 for a Current Owner Search, $79 for a Two Owner Search and $129 for a 30-Year Search. The reports match each loan to a release where one is recorded and flag loans that cannot be matched. For the wider picture, see the title search coverage page and the guide to how to do a title search.
Key takeaways
Key takeaways
- A deed of trust has three parties, borrower, lender and trustee. A mortgage has two.
- Both are recorded liens. Each stays on the record until a release, reconveyance or satisfaction is recorded.
- Texas sales under a deed of trust happen on the first Tuesday of a month, with 21 days' notice (Tex. Prop. Code 51.002).
- Arizona trustee sales cannot occur before the 91st day after the notice of sale is recorded (A.R.S. 33-807).
- An assignment moves the loan and closes nothing. A deed of trust is not a deed that transfers ownership.
Frequently asked questions
- What is the main difference between a deed of trust and a mortgage?
- A deed of trust adds a third party, the trustee, who holds an interest in the property as security and can sell it after a default. A mortgage has two parties and is typically enforced through a court foreclosure.
- Does Texas use mortgages or deeds of trust?
- Texas lenders use deeds of trust. The state recording statute lists a mortgage or deed of trust, and Tex. Prop. Code 51.002 sets how a sale under a deed of trust must be noticed and held.
- What is a trust deed in Arizona?
- In Arizona a trust deed is a deed that conveys trust property to a qualified trustee to secure the performance of a contract. The borrower is the trustor and the lender is the beneficiary. The trustee has a power of sale under A.R.S. 33-807.
- How is a deed of trust released?
- It is released by a recorded document that references it, such as a release of lien or a reconveyance by the trustee. Paying the loan off does not clear the record until that document is recorded.
- Is a deed of trust the same as a deed?
- No. A deed transfers ownership of property. A deed of trust is a lien that secures a loan. A deed in trust is a third thing: a deed that puts title into a trust.
- Can a deed of trust be foreclosed in court?
- In Arizona the beneficiary may choose to foreclose a trust deed as a mortgage under the same statute that gives the trustee a power of sale. For Texas, Tex. Prop. Code 51.002 sets the rules for a sale under the power of sale.
Sources
Primary records and official documentation cited in this article.
- 1Legal Information Institute, deed of trust (Wex)
- 2Texas Property Code 13.001, Validity of Unrecorded Instrument (Texas.Public.Law)
- 3Texas Property Code 51.002, Sale of Real Property Under Contract Lien (Texas.Public.Law)
- 4Arizona Legislature, A.R.S. 33-801, Definitions
- 5Arizona Legislature, A.R.S. 33-807, Sale of trust property; power of trustee; foreclosure of trust deed
- 6Arizona Legislature, A.R.S. 33-808, Notice of trustee's sale
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