If you live in Alaska, Arizona, California, Colorado, Georgia, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, or West Virginia you probably don’t have a mortgage, even if the bank, your friends and common chatter call it one. It’s more probable that you own your home through a Deed of Trust: something that’s a lot like a mortgage but not exactly the same. For legal purposes, mortgages and Trust Deeds are two completely different instruments.

Don’t assume that the laws around one apply to the other. Unfortunately, because they’re the most common way of transferring title in over a dozen states, some sloppy commentators confuse the issue by calling Deeds of Trust "mortgages" anyway. Before you do anything with your note, find out exactly what you’ve got. Don’t trust phone conversations. Instead, take a look at your papers or better yet, get a lawyer to look at them.

Obviously, this article is not legal advice but we can give you some informal tips about the key features behind a Trust Deed. They are:

Title to a Trustee: The big, distinctive feature of a Deed of Trust is that it’s an agreement between three parties: a borrower, a lender and an impartial third party: the trustee. The property’s title goes to the trustee until it’s paid off, though the borrower can take possession of the property as soon as everybody’s signed off on the agreement. Nevertheless, the fact that the trustee has legal title to the property is a significant factor that influences what happens in emergencies such as non-payment of the loan. Trust Deeds are commonly held by a title company.

Promissory Note: Trust Deeds use promissory notes to set down evidence of the debt. The note defines the debt and its conditions, (such as the amount, interest, etc.) so it’s absolutely necessary to make sure everything’s accurate. The lender retains the note until the borrower pays the loan off, after which it is marked "paid in full" and transferred to the borrower.

Rapid Foreclosure: As we mentioned, the trustee has the property’s title, which means that it can initiate a foreclosure and sale itself. For various reasons, most trustees appoint another, separate trustee to handle this. In the event of a default in payment the trustee puts notice in public records for 90 days, initiates 21 days of newspaper advertising and then sells the property. The trustee doesn’t even need to take anyone to court. This sale is final, but a borrower can prevent this by coming to some arrangement during the 90 day period of record.

If you think you’ve got a Trust Deed, take a close look at your papers. Deeds of Trust and promissory notes can both be sold for substantial payouts.