What is a Mortgage?

Whenever you borrow money to purchase a home, the bank legally has ownership of the home until the loan is paid-off. A mortgage or trust deed is the document that defines the terms of your possession of the home while the bank has ownership of it. The difference between a mortgage and a trust deed lies in how the bank is allowed to foreclose, or take back the property, if you fail to make your loan payments.

A mortgage requires what is called a judicial foreclosure. A judicial foreclosure requires the bank to make a public statement of its intent to foreclose, followed by a court order granting them authority to sell the property at a sheriff’s sale. There is no minimum amount of time that must elapse between the public notice and the sheriff’s sale, however, this whole procedure usually takes from several weeks to several months.

A trust deed does not require any court involvement in its foreclosure, and therefore authorizes a non-judicial foreclosure. A non-judicial foreclosure requires the bank to make a public statement of its intent to foreclose followed by a trustee sale, no less than 20-days after the public statement. Because the courts are not involved, the trustee sales typically do occur within one month of the public statement.

Are you in a state that generally uses a mortgage or a deed of trust? See below for a list:

Mortgage States Alabama Connecticut Delaware Florida Georgia Hawaii Illinois Indiana Iowa Kansas Kentucky Maine Massachusetts Michigan Minnesota New Hampshire New Jersey New Mexico New York North Dakota Ohio Oklahoma Pennsylvania Rhode Island South Carolina South Dakota Vermont Wisconsin Wyoming

Deed of Trust States Alaska Arizona Arkansas California Colorado Idaho Maryland Mississippi Missouri Montana Nebraska Nevada North Carolina Oregon Tennessee Texas Utah Virginia Washington Washington, D.C. West Virginia

Update: corrected the verbage re: non-judicial foreclosures.