How a Deed of Trust Can Help California Borrowers Reinstate Their 1st Mortgage
6 minute read
April 5, 2023


As a borrower in California, you may have heard the term “deed of trust” thrown around when discussing mortgages—but what exactly is a deed of trust in California, and how can it help you reinstate your first mortgage? 

In this guide, we will explore the ins and outs of deed of trust mortgages in California, including their benefits, how they work, and how they can help you keep your home, and why Marquee Funding Group is the perfect company to help.

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What is a deed of trust?

A deed of trust is a particular legal document used to secure a loan on real property, such as a residence or commercial building. It’s similar to a mortgage in that it provides security for the lender if the borrower defaults. 

However, in California, a deed of trust is the preferred method of securing a loan rather than a mortgage. 

Real property can be collateralized through a deed of trust, a legal document that streamlines the mortgage process for hard money lenders and borrowers. This type of legal document can be a straightforward way for a loan provider to secure a loan.

How a deed of trust can help guarantee your mortgage

When real property is used to guarantee a loan, this option gives the lender the privilege to take the benefit of the asset’s sale if the loan goes into default. 

This process is different than if you use a warranty deed, which transfers the proprietor’s rights of the property to the purchaser right away. Instead, a deed of trust won’t pass the property title unless the loan goes unpaid.

With any deed of trust, there are three participants involved.

  1. Trustor: the person who owns the property and is borrowing money
  2. Lender: the individual or business that is loaning the money, also referred to as the beneficiary
  3. Trustee: the individual or organization (frequently an escrow company) who legally possesses the real estate under the deed and is responsible for selling the property at auction in the event of default

The benefits of a deed of trust mortgage

There are several benefits to using a deed of trust mortgage in California. 

First, it’s a faster process than a traditional mortgage. Because the trustee holds the title, there is no need for a lengthy court process in the unlikely event of default. 

Additionally, the trustee can sell the property through a non-judicial foreclosure, a quicker and less expensive process than a judicial foreclosure—enabling hard money lenders to be more open to flexible loan and repayment terms.

Arguably, the biggest benefit of a deed of trust mortgage is that it allows for an easier transfer of ownership. If the borrower sells the property, the trustee can transfer the property title to its new owner without needing a new mortgage or refinancing.

How to reinstate your first mortgage with a deed of trust in California

If you’re facing foreclosure on your first mortgage in California, a deed of trust can be a useful tool to help you reinstate your mortgage. 

To do so, you will need to work with your hard money lender to come up with a repayment plan that will allow you to catch up on your missed payments.

Once you have a repayment plan in place, you can work with a trustee to execute a reinstatement of your mortgage. This process involves paying off all of your missed payments, as well as any fees or penalties that may have accrued. 

Once the reinstatement is complete, the trustee can transfer the title back to you, and you can resume making your regular mortgage payments.

The role of the trustee in a deed of trust

The trustee plays a crucial role in a deed of trust mortgage. They’re responsible for holding the title to the property and executing any foreclosure proceedings in the event of default. 

In California, a trustee must be a neutral third party, and they’re typically a title company or an attorney.

The trustee is also responsible for executing reinstatements of the mortgage. Once the borrower and the lender have developed a repayment plan, the trustee is responsible for collecting the necessary payments to bring the mortgage current.

Common misconceptions about deeds of trust in California

There are several misconceptions about deed of trust mortgages in California. 

One common misconception is that the trustee is on the side of the lender. The trustee is decidedly a neutral third party—one who is responsible for following the terms of the deed of trust, no matter which party thinks they are in the right.

Another misconception is that a deed of trust is the same as a mortgage. While both are similar, there are some key differences between the two. For example, in a deed of trust, the trustee holds the title to the property, while in a mortgage, the lender holds the title.

Legal considerations for deed of trust in California

There are several legal considerations to remember when using a deed of trust in California. 

First, working with a qualified attorney is important to ensure that the deed of trust is drafted correctly and legally binding. Additionally, it’s important to understand the foreclosure process in California, as it can be different than in other states.

It’s also important to understand your rights as a borrower in California. 

For example, California has a law called the Homeowner Bill of Rights, which provides certain protections for homeowners facing foreclosure. 

Understanding these laws and regulations can help you make informed decisions about your mortgage and property.

Marquee Funding Group is your go-to lender in California

In conclusion, a deed of trust can be an effective tool for California borrowers seeking to reinstate their first mortgage

By understanding how a deed of trust works and working with a qualified attorney and trustee, you can navigate the process and keep your home. 

If you already know that a second mortgage is right for you and are ready to begin, submit your loan scenario now, and we will contact you as soon as possible.

Photo by Mikhail Nilov

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