Someone who acts as a fiduciary and intermediary third party in a deed of trust is called a trustee. When you take out a mortgage, it is the lender who holds the title to your home. But when you opt for a deed of trust for real estate financing, it is a trustee who will physically hold the title of your property until you can fully pay back your loan.
Who can serve as trustees?
Laws on eligibility differ from every state. But in general, anyone can serve as a fiduciary as long as that individual is not related to or affiliated with the borrower or lender. Some states require that a trustee is an elected official (referred to as a public trustee). In some cases, legal or business entities take on the role. Usually, lenders will choose the trustee, then the borrower and chosen fiduciary have to agree to it.
What are their responsibilities?
- They must act in good faith and impartially, and avoid showing any bias towards the borrower or lender. They must administer the terms of the deed of trust with neutrality.
- They hold legal ownership of a property until the borrower pays back the loan in full. Once that happens, they transfer the title to the borrower.
- In cases of foreclosure, they handle the proceedings, from informing the borrower to selling the property. When a sale is completed, they will transfer or convey the title to the new owner. They also ensure to pay all costs related to the selling of the home, then apply the remaining money to the balance of the loan.