A deed of trust note is the instrument by which a particular loan, usually a mortgage loan, is secured by the lender. If the loan has been defaulted on, the lender can produce this note and proceed with foreclosure on the home. Without this note, a lender could not foreclose without court proceedings, which makes for a costly process to regain the loan. Using a deed of trust note as security for the loan is how mortgage lenders are able to keep interest rates lower than other lenders like credit card companies.
Many people wish to buy a home, but very few have the capital necessary to make such a purchase without a little financial help. Mortgages provide that help, allowing people to buy a home by making an initial down payment and then paying off the rest of the value, along with interest payments to the lender, over a period of time. Such agreements require a deed of trust note, which ensures that the lender can essentially take possession of the home if the borrower defaults on the payment.
On a typical deed of trust note, there are generally three parties involved. The borrower is known as the trustor, as she is essentially making the promise to endow this trust by paying back her loan. By contrast, the lender is known as the beneficiary, who will receive the payments in return for the initial loan. Finally, the trustee is a third party, usually a title company, that essentially acts as the administrator of this agreement and steps in if there is a default of some sort.
It is important to realize that the deed of trust note is not the same as a promissory note. The promissory note is the document that includes the terms of the loan upon which the two parties have agreed. Should the borrower fail to pay back the loan in the manner described by the promissory note, he would be in violation of that agreement, and the lender could then act. Without the deed of trust, though, the lender would have no immediate recourse for the default of the loan.
Failure to locate a deed of trust note can occur when the document is passed from lender to lender in a process known as an assignment of a deed of trust. Lenders will often sell mortgages to one another, a process that does not in any way affect the terms of the loan for the borrower. The ability by lenders to use the deed of trust to foreclose on homes allows them to keep interest rates from skyrocketing for potential home buyers.