Deed of Trust

A deed of trust is the security instrument used in Texas (and most western US states) to secure a mortgage loan against real property. Unlike a mortgage, which involves only two parties (lender and borrower), a deed of trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee) who holds title in trust. Upon default, the trustee — or a substitute trustee appointed by the lender — is empowered to sell the property at public auction without going to court, which is why Texas foreclosures are called 'non-judicial.'

Texas Context

The non-judicial foreclosure power granted by the deed of trust is the foundation of Texas's efficient foreclosure market. Because court involvement is not required, the timeline from default to auction is far shorter than judicial foreclosure states. Every residential mortgage in Texas is secured by a deed of trust, and the power of sale clause in that instrument is what gives lenders the right to hold First Tuesday auctions.