What is a Trust Deed?

A Trust Deed serves as an instrument that facilitates a loan secured by real estate, where a third party, known as the trustee, holds the title to the property on behalf of the borrower and the lender. In this arrangement, the borrower conveys the legal title of the property to the trustee, who holds it as collateral until the borrower fulfills their obligation to repay the loan. If the borrower defaults, the trustee has the authority to sell the property to satisfy the debt. This process streamlines the foreclosure process compared to traditional mortgages, as it typically involves fewer judicial proceedings.

The other options do not accurately define a Trust Deed. A legal claim to a property made by a creditor pertains more to liens or judgments rather than a Trust Deed, and a Trust Deed is not solely a document required for transferring ownership in general; it specifically concerns secured loans. While a Trust Deed can have implications for avoiding foreclosure through its streamlined process, that is not its primary definition but rather a feature of how it operates within the context of real estate finance.