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DOT v Mortgage - There are differences

Mortgages and Deeds of Trust are not necessarily the same thing, depending on how the state uses them.

Typically, a mortgage is a document in which the owner pledges his/her/its title to real property to a lender as security for a loan described in a promissory note. Mortgage is an old English term derived from two French words "mort" and "gage" meaning "dead pledge." To be enforceable the mortgage must be signed by the owner (borrower), acknowledged before a notary public, and recorded with the County Recorder or Recorder of Deeds. If the owner (mortgagor) fails to make payments on the promissory note (becomes delinquent) then the lender (mortgagee) can foreclose on the mortgage to force a sale of the real property to obtain payment from the proceeds, or obtain the property itself at a sheriff's sale upon foreclosure. However, catching up on delinquent payments and paying costs of foreclosure ("curing the default") can save the property. In some states the property can be redeemed by such payment even after foreclosure. Upon payment in full the mortgagee (lender) is required to execute a "satisfaction of mortgage" (sometimes called a "discharge of mortgage") and record it to clear the title to the property.

A purchase-money mortgage  is one given by a purchaser to a seller of real property as partial payment. A mortgagor may sell the property either "subject to a mortgage" in which the property is still security and the seller is still liable for payment, or the buyer "assumes the mortgage" and becomes personally responsible for payment of the loan. Under English common law a mortgage was an actual transfer of title to the lender, with the borrower having the right to occupy the property while it was in effect, but non-payment ended the right of occupation. Today only Connecticut, Maine, New Hampshire, North Carolina, Rhode Island and Vermont cling to the common law, and other states using mortgages treat them as liens on the property.

A deed of trust  is a document which pledges real property to secure a loan, used instead of a mortgage in Alaska, Arizona, California, Colorado, Georgia, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia and West Virginia. The property is deeded by the title holder (trustor) to a trustee (often a title or escrow company) which holds the title in trust for the beneficiary (the lender of the money). When the loan is fully paid, the trustor requests the trustee to return the title by reconveyance. If the loan becomes delinquent the beneficiary can file a notice of default and, if the loan is not brought current, can demand that the trustee begin foreclosure on the property so that the beneficiary may either be paid or obtain title.

Deed of Trust states: AK, AZ, CA, MS, MO, NE, NC, VA and DC

Mortgage states: AL, AK, CT, DE, FL, HI, IN, KS, KY, LA, ME, MA, MI, MN, NH, NJ, NM, NY, ND, OH, OR, PA, RI, SC, VT and WI

States that use both deeds of trust and mortgages:** CO, ID, IL, IA, MD, MT, NE, OK, OR, TN, TX, UT, WY, WA and WV

* Georgia uses a security deed

** Custom dictates which document is used

Article Details
Date Created February 02, 2011
Submitted by: KB Admin <KBadmin@pawnotary.com>
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