Trust Deed vs Mortgage states - Posted by Bill Gatten

Posted by Michael Morrongiello American Note on January 17, 2000 at 12:22:01:

My copy shows it was revised 1993. I am not sure if it has been updatd further.

Michael Morrongiello
Operations Manager

Trust Deed vs Mortgage states - Posted by Bill Gatten

Posted by Bill Gatten on January 16, 2000 at 16:46:20:

A few months back, the subject came up about which states are Mortgage States vs. Trust Deed States. In doing some research for my new book, I came up with the following information.

For those who were gracious enough to respond to my original post on the subject (breakinmg the states into just two categories), here is the (hopefully defintitive) list I have been able to compile for the book (the book is still in-process, by the way…if I could stay away from CREONLINE for a day or two, and stop screwing around with buying real estate, I’d get the time to finish it).


TRUST DEED STATES (Those states utilizing trust deeds exclusively as the common security device): Alaska; Alabama; Arizona; California; Maryland (mortgages permitted for non-institutional Seller-Assisted-Financing); Mississippi; Missouri; North Carolina; Virginia; West Virginia

MORTGAGE STATES (States wherein only mortgages are used or authorized exclusively as security devices): Colorado; Connecticut; Delaware; Florida; Hawaii; Kansas; Maine; Michigan; Minnesota; New York; North Dakota; Ohio; Pennsylvania; Rhode Island; South Carolina

COMBINATION STATES (States where trust deeds are authorized, but where either one might be used: though most often mortgages are more commonly used as the security device for lenders in these states): Arkansas; Idaho (TD?s used only with real property which is located in the incorporated cities or on real property no exceeding 20 acres); Illinois; District of Columbia; Indiana; Iowa; Kentucky; Massachusetts; Montana (TD?s used for properties under 30 acres); Nebraska; Nevada; New Hampshire; New Jersey; New Mexico; Oklahoma; Oregon; South Dakota; Tennessee (mortgages are rare); Texas; Utah; Vermont (TD?s used in commercial transactions); Virginia; Washington; West Virginia; Wyoming

OTHER (States in which devices other than trust deeds or mortgages are the common security device): Georgia (Security Deed, or Deed-to-Secure Debt), Louisiana (Vendor?s Lien; mortgages used only for commercial transactions)

Note that either (TD or mortgage) device could be used effectively in any state; however, absent the appropriate statutes there could be some considerable risk in not adhering to the common practices and authority within the state, and public recording agecny officals would likely not accept a form with which they are unfamiliar.

Hope this comes in handy from time-to-time. It will for me (it took a while to get it all together).

Bill Gatten

Note: The foregoing data is from my own initial research run-through, and has not been verified or proofed by our research person, or by our legal counsel, and should not be considered legal advice. Nor should it be relied upon without review by your own legal advisors.

Utah is primarily Trust Deed - Posted by John Behle

Posted by John Behle on January 17, 2000 at 09:29:26:

Though we have an approved mortgage form, it is rarely used. As a note buyer, the only time I run across mortgages is when they are prepared by an attorney that has no business being in that business.

One was prepared by some “Financial Planner” attorney. I picture the ignorance of pulling some twenty year old book of forms off the shelf and filling one out. As I always tell people when it comes to lawyers - “Don’t go to a dentist for brain surgery”. Physicians specialize, but many lawyers think they can do anything.

The other mortgage form I had brought to me was prepared by a criminal attorney (the type that defend criminals).

FREE Booklet available - Posted by Michael Morrongiello American Note

Posted by Michael Morrongiello American Note on January 16, 2000 at 22:09:05:

First American Title Insurance Co. has a wonderful FREE booklet called “Real Estate Practices - State by State” that provides a quick concise summary of what instrument is customary and what else is used in all 50 states.

Call them at their National Headquarters in Santa Ana, CA and ask them to mail you the FREE booklet
714-558-3211 (not sure if this # is up to date?)

What About Wisconsin? - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on January 16, 2000 at 20:22:11:


What about Wisconsin? Wouldn?t want to forget all the ?Cheese Heads? who do creative deals on dairy farms! (smile)

Also please note that you have West Virginia listed as both a trust deed state and a combination state. Probably just a typo?

I would also double check Colorado. I don?t know for sure, but I was under the impression that trust deeds are the norm in the Centennial State. Don?t take my word for it; I very easily could be mistaken. Perhaps one of knowledgeable folks from Colorado can help clarify.

By the way, thanks for taking the time to do the research and compile the list.

Best of Success!!

Jim Kennedy,
Houston, TX

Re: Trust Deed vs Mortgage states - Posted by Ann

Posted by Ann on January 16, 2000 at 20:20:10:


Kindly explain the differences in the
states: Mortgage State vs Trust Deed state. What is the difference? what are the implications? I have your book on PAC Trusts. (so, be kind)
ie, your post, why do I care what the state
approach is? What is the implication
of this?

(still learning here._
A brief explanation… does it have to do with
foreclosure proceedings?

Re: Utah is primarily Trust Deed - Posted by Bill Gatten

Posted by Bill Gatten on January 17, 2000 at 12:55:12:

I suspect that many states that have commonly used one form or the other for years prior to the authorization for the alternative, tend to continue with what has always worked. I note in in some states, mortgages are used for commercial property and trusts deeds for residential, and visa versa in others.

Bill Gatten

Re: FREE Booklet available - Posted by Bill Gatten

Posted by Bill Gatten on January 17, 2000 at 12:18:12:

Now you tell me.

BTW, they indicate that the last publishing was in 1983…do you know of any changes in any of the material since then?


Re: What About Wisconsin? - Posted by Bill Gatten

Posted by Bill Gatten on January 17, 2000 at 13:02:42:

Wisconisn? did I forget Wisconsin? Must be the cheese fungus we have here in California.

WISCONSIN: conveyance is by Warranty Deed; but installment land contracts are used extensively as well. Mortages are used, and Trust Deeds are NOT authorized.

COLORADO: Although mortgages are authorized, trusts deeds are indeed the most common form of security instrument.

WEST VIRGINA: Typo, you’re right. West Va. is grant and/or warranty deed transfer; with both trust deeds and mortgages being authorized as security instruments: though the trust deed is prevlanet and customary.

Bill Gatten

Re: What About Wisconsin? - Posted by JD

Posted by JD on January 17, 2000 at 09:53:59:

You are correct, Colorado is primarily a TD State.

Re: Trust Deed vs Mortgage states - Posted by Bill Gatten

Posted by Bill Gatten on January 17, 2000 at 12:49:31:

A DEED OF TRUST is an instrument which places a property’s legal title into the hands of a third party trustee (usually a title company) who is directed to act in favor of, and at the behest of, the trust’s beneficiary (the lender). In the event of a default in the underlying obligation to the beneficiary, the trustee is directed to take the property from the borrower and effect the sale the property and return loaned moneys to the beneficiary.

A MORTGAGE, on the other hand is a “hypothecation (i.e., a pledge w/o a transfer of title)” of an interest in a property, which provides the lender the right to sell the property and keep the money it is owed, if the borrower screws up. The lender can foreclose on the mortgagor?s (borrower’s) interest in the event of a default in its obligation.

Note that in most states today, unlike a deed of trust, a mortgage is considered no more than a lien against the property, and not a transfer of the property’s title.

In other words, a mortgage is more of a “pledge” to give up the property in the event a default, whereas a trust deed actually conveys legal ownership of the property into a type of trust to avoid any entanglements later on.

OK, ok… One is a “pledge”: the other is an “indenture.” In effect deeds of trust can be referred to as a (type of) mortgage: but with different processes and means of effecting foreclosure.

Gawd! That’s the worst definition I ever came up with! Behle, Bronchik, Piper, Vesole, Morongiello (sp)…somebody smarter’n me… help!

Bill Gatten