When a Secured Loan Is Transferred, the Deed of Trust Follows

The Security Follows the Debt

Loans change hands. Banks sell mortgages to other institutions, investors purchase pools of debt, and lenders assign individual notes as part of routine business. This statute makes sure the deed of trust travels with the loan automatically, without the need for a separate transfer of the security interest.

This is a practical safeguard. Without this rule, a lender who purchased a loan might find itself holding a promissory note with no enforceable lien on the property. The borrower could argue that the deed of trust stayed with the original lender. This statute eliminates that argument entirely.

Why This Matters for Property Owners

For borrowers and property owners, this statute confirms that the entity currently holding your loan has the legal authority to enforce the deed of trust, including the right to initiate a trustee sale if you default. It also means that when you receive a notice that your loan has been sold or transferred to a new servicer, the new holder already has the security interest. No separate recording is required for the transfer of the deed of trust to be effective, though many lenders do record an assignment of beneficial interest for clarity in the public records.