The Veridian Blog

My blog today touches upon the basic premise of the Deed of Trust (DOT) but did you know… that because of the DOT in California, there really isn’t a single “mortgage” that exists?  Before you jump out of your seats in utter glee, let me remind you that you still OWE money to the bank.  The word “mortgage” is incorrectly used in everyday terminology as a synonym for “home loan”.  Instead, the more accurate definition of “mortgage” is a document that a borrower gives to the lender as a security instrument – sort of like a DOT.  Also like the DOT, both documents are recorded in public, and both give the borrower full ownership rights and title before the debt is paid off. 

So… what’s the difference?  Practically, there’s not much, unless and until payment become delinquent.  The legal structure of the DOT consists of three parties (trustor, trustee, beneficiary) whereas the mortgage consists of two (lender and borrower).  When foreclosure becomes an issue, and a DOT has been recorded, the trustee (usually the escrow company) is the party that has the power to sell the house.  The lender must ask the trustee to initiate foreclosure proceedings and the trustee must progress as allowed by law and as dictated in the DOT.  But the process bypasses the court system, making it a much faster and cheaper way for a lender to foreclose whereas with mortgages, the lender must take action themselves through a lengthy judicial foreclosure. 

Over half of the states in the country use mortgages, and the rest (including us) use the DOT.  But no, I am not changing the company name to “Veridian Deed of Trust”…!