[TX] On a Deed of Trust, can Trustee and Beneficiary be related?

12 Replies

I am in talks with a local investment company to purchase an interest in one of their notes. However, looking at the Deed, the Trustee is listed as an individual, who is the owner of the investment company, while the beneficiary is listed as the investment company itself, which is a Texas LLC owned by the individual. My understanding is that these two should not be the same; however, I can see this being possible since an LLC is considered it's own separate legal entity. Is this correct?

No issue with it at all. The Trustee and the Beneficiary can even be the same person 

The Trustee can and often is changed with a simple Appointment of Substitute Trustee 

Originally posted by @Greg H. :

No issue with it at all. The Trustee and the Beneficiary can even be the same person 

The Trustee can and often is changed with a simple Appointment of Substitute Trustee 

 Highly recommend that the trustee and beneficiary NOT be the same person.  Unless you are supremely confident in understanding the requirements of the foreclosure process, hire a lawyer.

It's done routinely here.  When a loan is paid off it needs to be reconveyed.  Often the document for accomplishing that is a Substitution of Trustee and Reconveyance.  This document first substitutes the beneficiary as the trustee, then the trustee (now same as the beneficiary) reconveys the loan.  Two actions in one document.

Another power of a trustee is to foreclose, that is a very detailed process, best left to experienced folks.  In that case the beneficiary executes a Substitution of Trustee, removing the original trustee and replacing with a trustee experienced in foreclosure law.  

@Greg H. understood, just didn't want to leave it out there like that.

Account Closed Fascinating.  In TX, it is merely a Release of Lien by the lender.  Foreclosure can be pretty simple, BUT can get complex fast.

@Jerel Ehlert

I'm not an attorney, my knowledge is limited to having done this a whole bunch of times, and actually reading the documents I sign (unusual I know).  I'm an engineer by profession so like to get into the weeds when my money is involved.

Seems a deed of trust does exactly what it's name implies ... in exchange for a loan, the property owner deeds (conveys) legal (not equitable) title to a trust, giving the trustee specific powers, namely, the power of sale if default, and power to (re)convey when debt is satisfied, and probably other powers.  Who the trustee is is left entirely to the beneficiary, my understanding without reading the code is that a trustee can be anybody 18 or over, including the beneficiary.

I view a deed of trust much the same as a land trust, or estate planning trust, inasmuch as the interaction between the trustor, trustee and beneficiary is considered. Probably not exactly right but a helpful tool in understanding how a DOT works.

I've seen a release of lien in CA, but not for a deed of trust.  That document seems to be reserved for involuntary liens, like for example a judgment lien.

Foreclosure under a deed of trust is of course non judicial, and is spelled out very specifically in the code, so in that sense is simple, but very detailed.  Unless of course the foreclosure is contested in court, in which case all hell can break lose.

I know TX is a deed of trust state.  I'm wondering why there is a difference between the two states as to how a deed of trust operates ... any idea?

Account Closed

A good friend of mine owns a title company and when he is doing a closing for first time buyers he refers to the Deed of Trust as the "you pay you stay document". The DOT secures the mortgage/note and outlines the foreclosure process in Texas. Notes are not recorded in Texas(they can be but as a matter of practice they are not)

Normally the foreclosure process is very simple and straightforward in Texas and can be accomplished in as little as 41 days is the timing is perfect(Foreclosures only happen one day per month in Texas, the first Tuesday).  The typical issue that arises is bankruptcy where I have been involved in one that drug on for 2 years

@Greg H.

A DOT secures a note, OR, a mortgage secures a note, a DOT does not secure both a mortgage and a Note.

In CA, the DOT does not outline the foreclosure, the Civil Code does.

In CA, a non-judicial foreclosure takes 3 months + 21 days, IF, no bankruptcy

In CA, a re conveyance terminates a loan.

In TX, a lien release terminates a loan.

In both states a deed of trust is used.  How is it a different document is used in each state to terminate a loan, i guess is my question.  Not a big deal at all, just wondering.

Account Closed

I am well aware.  We have notes in Texas but most people refer to is as a mortgage so I was trying  avoid confusion 

Texas uses a release of lien when the loan has been satisfied 

While TX statutes say a foreclosure can take place in as little as 41 days if timed correctly, if the borrower is a consumer you will likely violate CFPB regulations.  Figure 6 to 9 months for consumer foreclosures.

Originally posted by @Jerel Ehlert :

While TX statutes say a foreclosure can take place in as little as 41 days if timed correctly, if the borrower is a consumer you will likely violate CFPB regulations.  Figure 6 to 9 months for consumer foreclosures.

 My understanding is the 120 days only applies to Servicers of over 5000 loans correct?