Deed of Trust vs. Mortgage

Deed of Trust vs. Mortgage Information

The key differences between a mortgage and a deed of trust: a mortgage involves two parties (the borrower/mortgagor and the lender/mortgagee); a deed of trust involves three parties (the borrower/trustor, the lender/beneficiary, and the trustee who holds legal title). In a mortgage state like Florida: the borrower retains legal title, the lender has a lien on the property, and foreclosure requires a judicial proceeding (the lender must file a lawsuit). In a deed of trust state: the trustee holds legal title, the borrower has equitable title, and the trustee may conduct a non-judicial foreclosure (power of sale) without court involvement. Florida's judicial foreclosure process provides greater protection for borrowers: the borrower receives service of process, may file defenses, and has a right of redemption.

Florida Legal Definition

Florida is exclusively a mortgage state under Florida Statutes Chapter 697 (Mortgages). Under §697.01, a mortgage is created when the mortgagor (borrower) conveys a security interest in real property to the mortgagee (lender). Under §697.02, a mortgage in Florida creates only a lien (not a transfer of title; Florida follows the lien theory). Foreclosure in Florida must proceed judicially under Chapter 702: the lender must file a complaint, serve the borrower, and obtain a court judgment before the property can be sold. There is no power of sale (non-judicial foreclosure) in Florida. Under §45.0315, the borrower has the right of redemption until the clerk files the certificate of title.

How It's Used in Practice

In practice, attorneys advise out-of-state lenders and borrowers on Florida's mortgage-only system. The attorney: explains that deeds of trust are not used in Florida (out-of-state lenders may attempt to use deed of trust forms from other states), ensures the mortgage document complies with Florida requirements (§697.01: signed by the borrower, witnessed by two witnesses, notarized, and recorded), advises on the judicial foreclosure process (which takes longer than non-judicial foreclosure in deed of trust states), and evaluates the implications for loan terms (Florida's judicial foreclosure process gives borrowers more time, which affects the lender's risk calculations and may result in higher interest rates or stricter terms). Common issues include: out-of-state lenders using deed of trust forms (which must be replaced with Florida mortgage forms), and borrowers who are unfamiliar with the judicial foreclosure process.

Key Takeaways

• Florida is a mortgage state; deeds of trust are NOT used.
• Mortgage creates lien only; borrower retains legal title.
• Foreclosure must be judicial (court proceeding) in Florida.
• No power of sale (non-judicial foreclosure) available.
• Borrower has right of redemption until certificate of title filed.

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Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC