Difference between Mortgage and Deed of Trust
We hear these terms in almost synonymous terms as people understand them in similar terms but they are two diverse concepts, terms, and entails different legal procedure. Notable difference between them is that they are two different types of security interests.
A mortgage is a two-party transaction. The lender, known as the mortgagee, places a lien on your house. It accepts the mortgage from you, the mortgagor, in exchange for loaning money to purchase your home. If you default, the lender can do a non-judicial foreclosure in which his/her senior interests are superior to anyone else under the purchase money mortgage terms, and supersedes any interests of a junior trust deed.
Deed of Trust is a three-party transaction with three parties:
The three parties are the
(2) trustor, and the
The lender is called the beneficiary because it benefits from the transaction by collecting interest. You are the trustor because you are “trusted” with the money. The final party is the trustee, who holds title for the benefit of the beneficiary. The trustee’s sole function is to initiate the foreclosure at the behest of the lender. Deed of Trust foreclosure does not require a Lawsuit. If you default, the trustee follows procedures agreed to in the Deed of Trust pursuant to the power of sale clause which does not involve the court also known as a Non-Judicial Foreclosure.
Lender can sue you for deficiency after foreclosure
The lender to sue you for any money still owed to it if the auction does not bring enough money to pay off the loan. However, Nevada has adopted antideficiency laws where the deficiency is waived, restricted or time barred.
Nevada Antideficiency laws?
Nevada Revised Statutes 40.451 deals with deficiency. (We are publishing more articles on Nevada antideficiency laws in our additional articles here) Nevada is a deficiency state where the lender may sue a homeowner after foreclosure for the amount the house sold that was less than what was owed. The homeowner will then have to pay the lender any amount that was due on the loan that was not paid off at sale.
However, there is time limit to file the deficiency lawsuit and in Nevada, it must be filed within six (6) months after the foreclosure sale, and the amount of the deficiency judgment is determined by a statutory formula. An appraisal is obtained to determine the actual fair market value on the date of sale. The homeowner is given a credit for the appraised value, or the sales price, whichever is greater.