Deed of Trust
The principal instrument used in Texas to grant a security interest in real property for the benefit of a lender. In form, the borrower (grantor) conveys the property to a third-party trustee in trust to secure the borrower's obligations to the lender (beneficiary), but Texas follows the lien theory, so the instrument creates a lien and title stays with the borrower. Its power of sale is what permits nonjudicial foreclosure 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, although drafted as a conveyance to a trustee in trust, creates only a lien under Texas's lien theory of mortgages. The deed of trust is the Texas analog to the mortgage, and its power of sale 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 the lien; (2) trustee, a third party (typically an attorney or title company employee) authorized to exercise the power of sale and conduct 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 by a simple written instrument. Lenders commonly appoint substitute trustees, often attorneys at the firm handling the foreclosure. Section 51.0001(7) defines "substitute trustee," and § 51.0075(c) lets a mortgagee or mortgage servicer appoint one by power of attorney, corporate resolution or other written instrument. Section 51.0074(b) provides that a trustee may not be assigned any duty other than to exercise the power of sale in accordance with the security instrument, and may not be held to the obligations of a fiduciary of the mortgagor or mortgagee.
Required content
A Texas deed of trust customarily (1) is in writing; (2) identifies the parties; (3) describes the real property; (4) identifies the secured obligation, usually the promissory note; (5) grants a power of sale; and (6) is signed by the grantor. To be recorded it must be acknowledged, sworn to or proved according to law (Tex. Prop. Code § 12.001). Recording with the county clerk in the county where the property is located is essential to bind subsequent purchasers and lenders.
Homestead and home-equity restrictions
Texas constitutional homestead protections (Tex. Const. art. XVI, § 50) place significant limits on residential deeds of trust. A homestead is protected from forced sale except for the debts listed in § 50(a), including purchase money, taxes, owelty of partition, refinance of a lien, work and material for improvements (with constitutional formalities), home-equity loans and reverse mortgages. Home-equity loans carry strict requirements, including a 12-day waiting period before closing, an 80% combined loan-to-value cap, limits on other debt secured by the homestead, and foreclosure only by court order, which may be obtained through the expedited process in Tex. R. Civ. P. 736. Property that is not a homestead is not subject to these protections, but an urban homestead can include a place where the owner exercises a calling or business (Tex. Const. art. XVI, § 51).
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 nonjudicial foreclosure mechanism is fast by statute: notice of sale must be given at least 21 days before a sale held on the first Tuesday of a month, and where the property is the debtor's residence a 20-day notice of default and opportunity to cure must come first (Tex. Prop. Code § 51.002(a), (b), (d)). Contractual cure and notice periods can lengthen that timeline.