Deed of Trust
The principal instrument used in Texas to grant a security interest in real property for the benefit of a lender. The borrower (grantor) conveys legal title to a third-party trustee, who holds it in trust to secure the borrower's obligations to the lender (beneficiary). Distinct from a mortgage in mortgage-state jurisdictions; the deed of trust enables the nonjudicial foreclosure framework available in Texas.
A deed of trust is the principal instrument used in Texas to grant a security interest in real property for the benefit of a lender. Despite its name, a deed of trust is not a deed in the conveyance sense, it is a security instrument that operates by conveying legal title to a third-party trustee, who holds it in trust to secure the borrower's obligations to the lender. The deed of trust is the Texas analog to the mortgage in mortgage-state jurisdictions, but its three-party structure enables the nonjudicial foreclosure framework that distinguishes Texas from many other states.
Three-party structure
Every Texas deed of trust involves three parties: (1) grantor, the borrower/property owner, who grants legal title to the trustee; (2) trustee, a neutral third party (typically an attorney or title company employee) who holds title in trust and conducts any foreclosure sale; (3) beneficiary, the lender, for whose benefit the trust is created. The trustee's role is dormant during ordinary loan performance, the borrower retains all practical incidents of ownership. Only on default does the trustee become active, exercising the contractual power of sale to conduct a foreclosure sale.
Power of sale
The defining feature of a Texas deed of trust is the power of sale, the trustee's contractual authority to sell the property at public auction without court involvement upon proper notice and default. This authority enables the nonjudicial foreclosure framework under Section 51.002, which is faster and less expensive than judicial foreclosure. The power of sale must be expressly granted in the deed of trust; without it, the lender's only recourse is judicial foreclosure (filing a lawsuit to obtain a court-ordered sale).
Substitute trustees
The deed of trust typically grants the lender the right to appoint a substitute trustee at any time, often via simple written instrument recorded with the county clerk. In practice, lenders almost always appoint substitute trustees, typically attorneys at the law firm handling the foreclosure, for the foreclosure process. Section 51.0001(7) defines "trustee" to include substitute trustees. Section 51.0074 limits trustee duties to those expressly stated in the security instrument and provides that trustees are not fiduciaries to the borrower.
Required content
A Texas deed of trust must (1) be in writing; (2) identify the parties; (3) describe the real property by legal description; (4) reference the underlying obligation (the promissory note) by date and amount; (5) include the power of sale; (6) be signed by the grantor; (7) be acknowledged before a notary for recording. Recording with the county clerk in the county where the property is located is essential to bind subsequent purchasers and lenders. Most modern Texas deeds of trust use the Fannie Mae/Freddie Mac uniform Texas instrument or a substantially similar template.
Homestead and home-equity restrictions
Texas constitutional homestead protections (Tex. Const. art. XVI, § 50) place significant limits on residential deeds of trust. A homestead may be encumbered by a deed of trust only for specified purposes, purchase money, taxes, mechanic's liens (with constitutional formalities), home-equity loans (with strict procedural requirements including 12-day waiting period, 80% loan-to-value cap, single-loan limit, and judicial foreclosure requirement). Commercial property is not subject to homestead protections; commercial deeds of trust track the standard nonjudicial framework without constitutional overlays.
For Texas commercial real estate borrowers and lenders, the deed of trust is the workhorse security instrument. The standard package at any commercial real estate closing includes a deed of trust granting the lender's lien, a promissory note evidencing the debt, and frequently a guaranty by the borrower's principals. The deed of trust's nonjudicial foreclosure mechanism makes Texas significantly more lender-friendly than judicial-foreclosure states, foreclosure can be completed in approximately 60-90 days from default rather than 6-18 months in judicial states. Borrowers should understand this foreclosure speed when negotiating cure periods and other protective provisions.