texas assignment of deed of trust form

Assignment of Deed of Trust (Commercial) (Texas)

This template is an assignment of deed of trust that may be used to assign and transfer an existing deed of trust from an existing lender to a lender in Texas. This template includes practical guidance and drafting notes. A Texas assignment of deed of trust should be recorded in the land records office of the county (or counties) where the property is located, to provide notice to third parties of the transfer of the deed of trust lien on the property. See Tex. Prop Code § 11.001. The assignment should be recorded in the same county recorder's office where the prior vesting deeds and deed of trust were recorded. For a detailed discussion of real property transfers, see Purchase and Sale of Commercial Real Property (TX). The note secured by the deed of trust should also be transferred at the same time as the deed of trust via an allonge or other indorsement. The mortgage assignment will be recorded in the real property records of the county in which the property is located. However, if a party does not have a recorded interest in the deed of trust, the party may still have standing to foreclose if the note secured by the instrument was validly assigned. This rule derives from the common law maxim, now codified in Texas, that "the mortgage follows the note." See Tex. Bus. & Com. Code Ann. § 9.203(g) and Everbank v. Seedergy Ventures, Inc., 499 S.W.3d 534, 536, 2016 Tex. App. LEXIS 7319, *1, 90 U.C.C. Rep. Serv. 2d (Callaghan) 349. For a template allonge, see Allonge to Negotiable Promissory Note (Residential/Commercial) (TX). For more on recording an assignment of deed of trust in Texas, see Recording Procedures (TX). For a template Texas note, see Promissory Note (Secured Loan) (TX). For additional Texas acquisition financing resources, see Commercial Real Estate Acquisition Loan Resource Kit (TX). For further information on promissory notes, see Promissory Notes (Acquisition Loan).

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Texas Deed of Trust

A Trust Deed or a Deed of Trust is the document that creates a lien on real estate to secure a Promissory Note , which is a promise to repay borrowed money. It is one of two documents you will need for a Real Estate Loan.

Note: The Texas Deed of Trust creates a lien on the borrower’s interest in real property to secure the promise to pay borrowed money.  A Deed of Trust also contains many obligations of the Borrower, including the payment of property taxes, insurance, and maintenance and repairs of the property. It should be filed with the County Clerk to create a lien on the borrower’s interest in the real property.

There are three parties named in a Deed of Trust.

• The person signing the Deed of Trust is called the Grantor . This is the person that owes the borrowed money . Also called the Borrower. This Grantor is the only person to sign the document. The Grantor must own title to the property. Only the Grantor’s interest in the property can be used as collateral for the loan. This person is referred to as the Grantor because he or she is “Granting” a lien on the property to secure the promissory note. If the Grantor or Borrower only owns title to a 50% interest in the property, the lien only applies to 50% of the title to the property. The Grantor is granting permission to the Trustee to sell the property if the Grantor fails to comply with the Real Estate Loan documents. In a Mortgage, the Grantor is called the Mortgagor. Grantor is the owner of the interest in real property used to secure the repayment of the borrowed money.
• The next person named is the Trustee . This is the person or entity that is authorized by the Grantor/Borrower to sell the property if there is a default or failure to comply with the Real Estate Loan documents. The Trustee is usually the person that prepares the Deed of Trust. It is usually a lawyer or an employee of the Lender. The Lender can change the Trustee at any time. However, the Grantor or Borrower cannot change the Trustee.
• The third person named in a Deed of Trust is the Grantee or Beneficiary . This person or entity is the Lender, or the person or entity to whom the money is owed. The Trustee does nothing unless the Lender requests the Trustee to start the foreclosure process if there is a default on the loan.

A Deed of Trust should be filed with the County Clerk in the county where the property is located.

When a Deed of Trust is properly prepared, signed, and filed with the County Clerk, a lien is created on the property to secure the repayment of the borrowed money.

Note: The document must include the correct legal description of the property so that the lien is created on the correct property.  This is required by the Texas Property Code.

The borrower must own legal title to the property that is being pledged to secure the borrowed money.

Good to know: If the borrower defaults on the promise to repay the borrowed money, the lender is permitted to foreclose the lien to sell the property at a public auction.  The Texas Property Code sets out the Texas lien foreclosure process.  The borrower’s interest in the real property is sold at a public auction and the money received at the sale is used to repay the borrowed money.

Mortgage Deed of Trust

Some people refer to a Trust Deed as a Mortgage Deed of Trust. Although a Deed of Trust is similar to a Mortgage, which is used in other states, it is not a Mortgage.

Good to know: Texas does not use mortgages. Instead, Texas uses Deeds of Trust. The document is referred to as a Deed of Trust because there is a Trustee named for the property.

Even though there is a Trustee named, the Trustee does not do anything unless there is a default or a failure to comply with the promissory note or deed of trust.

With a Deed of Trust, a Trustee is named and authorized to sell the property at a public auction if there is failure to comply with the promissory note or the deed of trust.

This is referred to as a non-judicial foreclosure sale, which means the Lender does not need to ask a court permission to foreclose its lien. The Lender merely sends a letter to the Trustee and asks the Trustee to conduct the foreclosure.

Note: The Texas Property Code prescribes the foreclosure process.  Generally it requires that foreclosure sales are to be held on the first Tuesday of each month in Texas.  The Trustee is required to give the Borrower 21 days prior written notice of the day of the foreclosure sale.

The Trustee is required to file and post a public Notice of Sale with the County Clerk.  The Notice of Sale must contain the correct legal description of the property to be sold at public auction.  Only the Borrower’s interest in the real property can be sold at the public auction.  Title to the property is transferred at the public auction for cash.  The cash is applied to the borrowed money and expenses of the sale.

Good to know: Mortgages or other types of loans require the Lender to go to a court and ask permission to foreclose its lien to sell the property. However, the Texas Property Code does not require the court to foreclose a Deed of Trust lien.

The Borrower may have rights to file a lawsuit to stop a foreclosure sale if the Trustee or Lender fails to comply with the Deed of Trust or the Texas Property Code.

Borrowers may also have the right to file for Federal Bankruptcy protection.

Basically, the foreclosure process in the Texas Property Code requires the Trustee to send letters to the Grantor/Borrower demanding that he or she comply with the Loan Documents. If the Borrower’s defaults are not fixed, the Trustee is authorized to sell the Borrower’s interest in the property at public auction.

Deed of Trust

If you loan someone money and want to secure the promise to repay the borrowed money with real estate, you will need a Deed of Trust .

To secure the loan, the Borrower, the person that owes you the money, signs a Deed of Trust to give you, the Lender, a lien on real estate. A correct legal description of the property is essential to make sure the Lender has a valid lien on the Borrower’s interest in the real property.

The Borrower does not need to own the property, BUT the person signing the Deed of Trust must own an interest in the property. It is legal for one person to pledge his or her interest in real property as collateral for another person’s loan.

The Deed of Trust must be in writing, signed by the property owner, and filed in the County Clerk property records.

The Deed of Trust should describe the loan amount, name a Trustee, and describe the collateral securing the loan. A correct legal description of the property is essential for a valid Deed of Trust.

Good to know: One Deed of Trust can be used to grant liens on multiple properties if required by a Lender. Sometimes one property may not have sufficient value to secure the borrowed money.

A Deed of Trust can also provide for Partial Releases if the Borrower pays the loan amount down and wants some of the property released from the lien.

Note: Once the loan is paid as agreed, the Lender must file a Release of Lien to remove the lien from the property. It is the Lender’s obligation to release the lien when the loan has been paid in full. The Release of Lien should be promptly filed with the County Clerk.

If a Borrower defaults and does not repay your loan, a Trust Deed or Deed of Trust allows you to ask the Trustee named in the Trust Deed to sell the Borrower’s interest in the property at a public auction.  Proper public notices are required by the Texas Property Code. 

The money the Trustee receives at the public auction is given to you, the Lender, to be applied to the borrowed money, interest, attorney’s fees and foreclosure expenses.  Any excess money is to be given to the Borrower.

Seller Financed Mortgage

If a seller offers a Seller Financed Mortgage for the sale of the property, there must be 3 documents signed: a Promissory Note, a Deed of Trust and a Warranty Deed.

• The Promissory Note is the promise to pay for the property.
• The Deed of Trust puts a lien on the property to secure the promise.
• The Warranty Deed transfers the property to the Buyer.

Good to know: If you loan someone money and want collateral for the loan, you will need a Deed of Trust. However, beware that you should not use a person’s residence as collateral. This may violate the Texas Homestead Laws which prohibits liens on homesteads in Texas.

Promissory Note

A Deed of Trust is rarely used without a Promissory Note . A promissory note is one of the two documents needed for a Real Estate Loan.

The Promissory Note is a promise to pay money. The Promissory Note states the amount owed, the interest rate, number of payments, maturity date, payment amount and many other provisions.

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The Texas Deed of Trust

A Deed of Trust in Texas transfers title of real property in trust. It is the equivalent to a mortgage used in other states and provides a secured interest for a lender against real estate. It is often used as part of a real estate transaction that includes a Warranty Deed with a Vendor’s Lien and a Promissory Note. This article will discuss the common elements of a Texas Deed of Trust.

Important Terms to Know

One of the more challenging aspects of drafting a Deed of Trust is the potential to use terms and labels incorrectly. Therefore, understanding and applying the following terms correctly is critical:

• The Grantor is the person who owns the land in question and is granting the security interest in real property; Since the Grantee in the Deed is also the Grantor in the Deed of Trust, doublecheck to ensure that the name of the Grantee in the Deed matches the name of the Grantor in the Deed of Trust. Confusing these two terms is a common and costly error.
• The Grantee , also known as the Beneficiary , is the person identified in the Deed of Trust as receiving the security interest in land. The Grantee may be a bank or another third-party lender furnishing part of the money for the land sale, or the Grantee in a Deed of Trust may be the Grantor in a Deed (owner financing scenario).
• The Trustee , usually chosen by the lender, is the person who represents both the Grantor and the Grantee (Beneficiary) if there is a default under a Deed of Trust. When no specific trustee is required by the lender, someone willing and able to hold a foreclosure sale if necessary may be selected. However, an attorney that represents the borrower should not name himself as trustee to avoid a conflict of interest.

A Deed of Trust also includes clauses and information such as the Confidentiality Notice, identity of the parties, description of the indebtedness, legal description of the land conveyed in trust as security for the indebtedness, granting clause, grantor’s obligations, beneficiaries’ rights, trustee’s duties, and other general provisions.

Given the difficulty with accurate labels and the legal complications which can result from vague and incorrect language, using a qualified real estate lawyer is an essential part of a smooth real estate transaction, especially when a Deed of Trust is required.

All information provided on Silblawfirm.com (hereinafter "website") is provided for informational purposes only, and is not intended to be used for legal advice. Users of this website should not take any actions or refrain from taking any actions based upon content or information on this website. Users of this site should contact a licensed Texas attorney for a full and complete review of their legal issues.

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Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing (Pro-Lender Short Form) (With Loan Agreement) (TX) | Practical Law

Deed of Trust, Assignment of Leases and Rents, Security Agreement, and Fixture Filing (Pro-Lender Short Form) (With Loan Agreement) (TX)

Practical law standard document w-007-1336  (approx. 71 pages).

Deed Of Trust: What It Is And How It Works

Updated: Mar 2, 2023, 3:15am

Buying property usually comes with an avalanche of paperwork. It can be a confusing process, especially when it comes to knowing the difference between the various documents you sign. If there’s one contract that’s important to understand, however, it’s the deed of trust.

Depending on your lender and the state you live in, you may or may not need a deed of trust when financing a home purchase. Here’s what you should know about this contract and how it differs from a mortgage .

What Is a Deed Of Trust?

When you finance the purchase of a property, you will sign either a mortgage or deed of trust—but not both. You can take out a mortgage in all 50 U.S. states, while a deed of trust is only available in some states.

A deed of trust is a legal document that secures a real estate transaction. It works similarly to a mortgage, though it’s not quite the same thing. Essentially, it states that a designated third party holds legal title to your property until you’ve paid it off according to the terms of your loan. Deeds of trust are recorded in public records just like a mortgage.

How Does a Deed of Trust Work?

A deed of trust exists so that the lender has some recourse if you don’t pay your loan as agreed. There are three parties involved in a deed of trust: the trustor, the beneficiary and the trustee.

The three parties involved in a deed of trust for a real estate transaction are a:

• Trustor. This is the person whose assets are being held in the trust, also known as the borrower (i.e., you). The title to your home is held by the trust until the loan is paid off. Even so, you remain the equitable owner as long as you keep paying the loan according to the terms outlined in the deed of trust. That means you enjoy all the benefits of being the homeowner, such as the right to live there and gain equity, even though you aren’t the legal title holder.
• Beneficiary. The beneficiary is the party whose investment interest is being protected. Usually, that’s the lender, though it also can be an individual with whom you have a contract.
• Trustee. The trustee holds the legal title of the property while you’re making payments on the loan. Trustees often are title companies, but not always. Once you’ve paid off your loan, the trustee is responsible for dissolving the trust and transferring the title to you.

If you sell the property before it’s paid off, the trustee will use proceeds of the sale to pay the lender the remaining balance (you keep the profits). If you fail to meet your payment obligations and default on the mortgage, the property would go into foreclosure , and the trustee would be responsible for selling the property.

What Is Included in a Deed of Trust

A deed of trust includes many important details about your property, loan and related terms and conditions—much of the same information you would find in your mortgage. Typically, you’ll find the following outlined in a deed of trust:

• The names of the parties involved (the trustee, trustor and beneficiary)
• The original loan amount and repayment terms
• A legal description of the property
• The inception and maturity dates of the loan
• Various clauses, such as acceleration and alienation clauses
• Any riders regarding the clauses outlined

It’s common for a deed of trust to include acceleration and alienation clauses. If you’re delinquent on your loan, it can trigger the acceleration clause—essentially a demand for immediate repayment of the loan. Depending on the terms, this can happen after missing just one payment, though lenders often give a few months of leeway to allow the borrower to catch up on payments. If you fail to do so under the terms outlined in the acceleration clause, the next step is formal foreclosure proceedings.

An alienation clause is also known as a due-on-sale clause and it prevents anyone who buys the property to take on the loan under its current terms. Instead, the alienation clause would dictate that the loan must be paid in full if you sell the property.

Depending on your state, the deed of trust may also include a power of sales clause. This allows for a much faster foreclosure process than if your lender had to involve the state courts in a judicial foreclosure. That said, you won’t be foreclosed on overnight under a power of sales clause; the exact process differs by state and lender. Still, if you’re facing a nonjudicial foreclosure, it can happen in a matter of months. If you want to formally fight the foreclosure, you’ll need to hire a lawyer.

States that allow power of sale foreclosures include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Georgia, Hawaii, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia and Wyoming.

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Deed of Trust Vs. Mortgage

The terms “deed of trust” and “mortgage” are often used interchangeably, but they’re really two different things. That said, there are also some similarities. To review, here are the key ways a mortgage and deed of trust are similar as well as different.

Similarities

• Public record: Both documents are recorded with the county clerk.
• Subject to state law: The exact terms of a mortgage or a deed of trust depend on the local state law.
• Contracts, not loans: Neither document serves as the actual loan agreement; a deed of trust or mortgage is a contract that places a lien on your property and dictates how your lender can repossess the property through foreclosure.

Differences

• Parties involved: A mortgage is an agreement between a borrower and lender, while a deed of trust involves a trustor, beneficiary and trustee.
• Foreclosure type: A mortgage requires a judicial foreclosure, while a deed of trust allows for a nonjudicial foreclosure.
• Foreclosure timeline: Judicial foreclosure on a mortgage can be a lengthy process, while nonjudicial foreclosure through a deed of trust is much faster.

What’s the Advantage of a Trust Deed Over a Mortgage?

If the borrower defaults, a trust deed makes it possible for the lender to sell the property without having to go to court. With a mortgage, the lender has to file a foreclosure claim in court and secure a judge’s approval to sell the property. This can mean a lot of expenses for both the borrower and the lender.

If you are investing in a real estate project, a trust deed also has a few advantages over a mortgage. This is because the investor is considered the lender in the transaction, and their name is recorded on the trust deed as such. The investor can receive interest on their “loan” and the principal is repaid in full once the property has been built.

Warranty Deed Vs. Deed of Trust

Both a warranty deed and deed of trust are used to transfer the title of a property from one person to another. However, the difference between these two contracts is who is protected. As you now know, a deed of trust protects the beneficiary (lender). A warranty deed, on the other hand, protects the property owner.

When a property title is transferred with a warranty deed, ownership goes from the seller (also known as the grantor) to the buyer (also known as the grantee). The warranty deed guarantees that the previous owners, or grantor, had full ownership of the property and right to transfer it. In other words, it promises that you won’t inherit any liens or future claims against the property. It provides peace of mind that you own the property outright once the title is in your name.

Are Trust Deeds a Good Idea?

Trust deeds could be a good idea if you are an investor searching for options to earn passive income, while also being protected via the deed. However, investing in real estate is unpredictable and returns are never guaranteed. A trust deed does not reduce the probability of default or ensure that you will recoup your initial investment.

Consult with a financial advisor or investment professional before going down this route.

Personal finance writer Casey Bond contributed to this article.

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Frequently Asked Questions (FAQs)

What is an assignment of deed of trust.

An assignment of trust deed is necessary if a lender sells a loan secured by a trust deed. It assigns the trust deed to whoever buys the loan (such as another lender), granting them all the rights to the property. It is recorded along with the original, making it a matter of public record.

What happens with the deed of trust after you pay off your mortgage?

Once you pay off your loan, the trustee is responsible for releasing the trust and transferring the title to you. You now have full ownership of the home.

Can you sell a house with a deed of trust?

Yes, you can. However, if you are selling the house for less than the loan amount, you will need the lender’s approval. Once the property is sold, the trustee uses the proceeds to pay the lender what they are still owed. The borrower then gets any money that is left over.

How long does a deed of trust last?

A deed of trust, like a mortgage, typically has a maturity date, which is when the loan must be paid off in full. That date will vary transaction to transaction. Sometimes a deed of trust won’t have a maturity date. In this scenario, state law dictates the number of years a deed of trust lasts, anywhere from 10 to 60 years after it was recorded.

What is a purchase money deed of trust?

A purchase money deed of trust secures the funds used to buy the property. It also gives the buyer priority over any liens or encumbrances against them

Does a deed of trust show ownership?

No. A deed of trust is a legal document that secures a real estate transaction. It only shows that a designated third party holds legal title—i.e. ownership—to your property until you’ve paid it off, according to the terms of your loan.

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What Is a Deed of Trust?

How deeds of trust work, deed of trust vs. mortgage, the bottom line.

• Personal Finance

Deed of Trust: Meaning, How it Works, Benefits

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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A deed of trust (also known as a trust deed) is a document sometimes used in financed real estate transactions, generally instead of a mortgage . Deeds of trust transfer the legal title of a property to a third party —such as a bank, escrow company, or title company—to hold until the borrower repays their debt to the lender.

Although deeds of trust are less common than they once were, some 20 states still mandate the use of one when financing is involved in the purchase of real estate. States where trust deeds are common include Alaska, Arizona, California, Colorado, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Tennessee, Texas, Virginia, and West Virginia. A few states—such as Kentucky, Maryland, and South Dakota—allow the use of both trust deeds and mortgages.

Key Takeaways

A deed of trust is a document used in real estate transactions. It represents an agreement between the borrower and a lender to have the property held in trust by a neutral and independent third party until the loan is paid off.

• Deeds of trust are used as an alternative to a mortgage, but there are differences between these arrangements.
• A mortgage involves only two parties: the borrower and the lender. A deed of trust adds an additional party, a trustee, that holds the home’s title until the loan is repaid.
• There are also different foreclosure arrangements related to these two documents.

Deeds of trust are used in financed real estate transactions: that is, when someone borrows money to buy real estate. During such a transaction, a lender gives the borrower money in exchange for one or more promissory notes linked to a deed of trust.

The deed of trust performs an important role in these transactions: The deed transfers legal title to the real property to an impartial trustee , typically a title company, escrow company, or bank, which holds it as collateral for the promissory notes. The equitable title—the right to obtain full ownership—remains with the borrower, as does full use of and responsibility for the property.

This state of affairs continues throughout the repayment period of the loan. The trustee holds the legal title until the borrower pays the debt in full, at which point the title to the property becomes the borrower’s. If the borrower defaults on the loan, then the trustee takes full control of the property.

A deed of trust can be used as an alternative to a mortgage. A mortgage involves two parties: a borrower (or mortgagor) and a lender (or mortgagee). In contrast, a deed of trust involves three parties: a borrower (or trustor), a lender (or beneficiary), and the trustee.

Deeds of trust can be compared with mortgages. Deeds of trust and mortgages are both used in bank and private loans for creating liens on real estate—that is, establishing a property as collateral for a loan. Because of this, and contrary to popular usage, a mortgage is not technically a loan to buy a property; it’s an agreement that pledges the property as collateral for the loan.

A deed of trust is different from a mortgage in a couple of ways:

First, a mortgage involves two parties: a borrower (or mortgagor) and a lender (or mortgagee). In contrast, a trust deed involves three parties: a borrower (or trustor), a lender (or beneficiary), and the trustee. The trustee holds title to the property for the lender’s benefit; if the borrower defaults , then the trustee will initiate and complete the foreclosure process at the lender’s request.

Second, mortgages and trust deeds have different foreclosure processes:

• With a mortgage, the lender must pursue a judicial foreclosure . This is a court-supervised process enforced when the lender files a lawsuit against the borrower for defaulting on a mortgage. The process is time-consuming and expensive.
• In contrast, a deed of trust lets the lender commence a faster and less expensive nonjudicial foreclosure, bypassing the court system and adhering to the procedures outlined in the trust deed and state law. If the borrower does not make the loan current, then the property is put up for auction through a trustee’s sale.

Is a Deed of Trust the Same as a Mortgage?

No. A mortgage only involves two parties: the borrower and the lender. A deed of trust adds an additional party, a trustee, who holds the home’s title until the loan is repaid. There are also different foreclosure arrangements related to these two documents.

What Is the Advantage of a Deed of Trust Over a Mortgage?

A deed of trust has a crucial advantage over a mortgage from the lender’s point of view. If the borrower defaults on the loan, then the trustee has the power to foreclose on the property on behalf of the beneficiary.

Are Trust Deeds a Good Idea?

Trust deeds can be a valuable aid to financial stability, but they are not right for everybody. They are best suited to people who have a regular income and can commit to regular payments. This is due to the stricter, faster foreclosures available with deeds of trust vs. regular mortgages.

Deeds of trust are used as an alternative to a mortgage, but there are differences between these arrangements. A mortgage only involves two parties: the borrower and the lender. A deed of trust adds an additional party, a trustee, who holds the home’s title until the loan is repaid. There are also different foreclosure arrangements related to these two documents.

Rocket Lawyer. “ Which States Allow Deeds of Trust? ”

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