"Mortgage" vs. "Deed of Trust"

Many of people incorrectly call the "home loan" a "mortgage", but in fact, a mortgage is not what your lender gives you to buy a home.  A mortgage is actually the formal document proving the legal claim or lien on a piece of property that you give to the lender who holds it as security for the money you borrowed.  The lien is recorded in public records.  On a mortgage, you pledge the property as security for the repayment of your loan, but you do not transfer title to the lender.

If you (the mortgagor) repay your loan in accordance with the terms of the mortgage, it is canceled or satisfied by the lender (the mortgagee) by recording of "Satisfaction of mortgage statement" with the county recorder.  However, if you do not repay your debt, the lender has the right to sell the secured property to recover funds through a "court proceeding called foreclosure" or if the "power of sales clause" is provided in the mortgage document, the sales can be conducted through the trustee's sales auction.

In some states, a "deed of trust" is used in place of a mortgage.  While a mortgage involves two people (the borrower and the lender) a deed of trust involves three people - the borrower (or trustor), the lender (the beneficiary) and a trustee, a neutral third party, such as an attorney or a title agent. The deed of trust is also recorded in public records.

In a deed of trust transaction, the borrower (trustor) transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the loan to the lender.  The deed of trust is canceled when the debt is paid and property revert to the trustor by the deed of reconveyance conducted by the trustee. 

However, if you default on your payment of the loan, the trustee may sell the property based on "power of sales clause" provided in the deed of trust,at the trustee's sales auction according to the request of the lender without a court proceeding and with no right of deficiency judgement against borrower (trustor), or on the other hand can be conducted through court proceeding by the lenders if they want to impose the deficiency judgement against the borrower (Trustor) to obtain the deficient amount from trustee's sales price of the forclosed property versus defaulted Loan amount.