What a Deed of Trust Actually Is
Under Arizona law, most real estate loans use a deed of trust instead of a traditional mortgage. The difference matters for estate planning and the foreclosure process.
A deed of trust involves three parties. The borrower (trustor) owns the property. The lender (beneficiary) provides the loan. A neutral third party (trustee) holds legal title as security until the loan is paid.
"Trust deed" or "deed of trust" means 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(8)This three-party structure lets Arizona use a non-judicial foreclosure process. The trustee already holds title, so there is no need to go to court if the borrower defaults. The trustee can sell the property through a trustee's sale.
The Three Parties and What They Mean
The trustor is the property owner who borrows money and pledges the property as security. The beneficiary is the lender or the person the loan benefits. The trustee is a qualified individual or entity that holds title in trust until the debt is paid off.
"Trust property" means any legal, equitable, leasehold or other interest in real property which is capable of being transferred, whether or not it is subject to any prior mortgages, trust deeds, contracts for conveyance of real property or other liens or encumbrances.
A.R.S. § 33-801(9)The definition of trust property is broad on purpose. It covers nearly any transferable interest in real estate. This includes property already tied to other liens.
The legal description of the property must meet standards set out in A.R.S. 33-802. As a result, lenders can use deeds of trust for second mortgages, home equity lines of credit, and other secured lending.