Deed of trust (real estate)

This confusing situation is a legacy of the archaic (and now-obsolete) common law requirement of livery of seisin, under which English common law courts had refused to enforce shifting fees or springing freehold interests (that is, a gage for years that was supposed to automatically expand to fee simple title if the underlying debt was not repaid).

[6] Deeds of trust are the most common instrument used in the financing of real estate purchases in Alaska, Arizona, California, Colorado, the District of Columbia, Idaho, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and West Virginia, whereas most other states use mortgages.

An example is the standard conveyance clause from a Freddie Mac "uniform instrument": Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described property...[7]In the states that enforce "power of sale" clauses, the courts have uniformly held that by executing a deed of trust with a "power of sale" clause, the owner has authorized the trustee to conduct a nonjudicial foreclosure in the event of default.

The trustee then issues a deed conveying the legal and equitable title to the property in fee simple to the highest bidder.

The process starts only when the lender or trustee records a "notice of default" no matter how long the loan payments have been unpaid.

For certain home loans made between 2003 and 2007, because of current economic conditions, California law was amended to add a temporary additional 60 days to the process.

If the debtor has sufficient senior secured claims upon his assets, lacks equity, or is otherwise insolvent, the junior liens may be wiped out completely in bankruptcy.