A deed of trust is a security agreement used in some states, including Alaska, as an alternative to a mortgage. A deed of trust is an agreement between three parties: a borrower, lender and trustee. The lender forwards money to the borrower for the purpose of purchasing real estate. The borrower purchases real property with the money and transfers title to the property to a neutral third party, called a trustee. The trustee's only duties arise at the end of the transaction when he must transfer the title back to the borrower if the debt is paid in full or sell the property to repay the lender if the borrower defaults on his loan.
The chief difference between a deed of trust arrangement and mortgage is the question of who holds title to the property. In a mortgage, the lender retains factual ownership of the real property and only relinquishes it to the borrower when the loan is paid in full. In a deed of trust such as those used in Alaska, the trustee holds title to the property; either the borrower or lender will have a claim to the title in the future depending upon whether the borrower pays off or defaults on the loan.
Alaska law does not set out any particular qualifications that an individual or business entity must possess to serve as the trustee in a deed of trust in the state. Traditionally, to serve in the role of a dual or common agent, the trustee may not have close ties to or be affiliated with either the lender or the borrower. Even this requirement of neutrality is not specified in Alaska statutes, but may be assumed by courts based on the nature of the trustee's dual agency role. Many deed of trust trustees in Alaska are banks, title companies or attorneys.
Before a trustee can sell real property subject to a deed of trust, Alaska law requires him to obtain a bond in the amount of $100,000 to protect the parties against any fraud or negligence on his part. Alaska Statute § 34.20.125, which sets out the bonding requirement, specifically excepts trustees who are attorneys licensed to practice in Alaska as well as trustees that are state agencies.
In Alaska, the lender can replace a trustee at will without the permission of the borrower. Under Alaska Statute § 34.20.120, the lender may replace the trustee of a real property trust deed simply by recording a signed substitution of trustee. The substitution must include the date the trust deed was executed; names of the lender, borrower and trustee; book and page on which the deed of trust is recorded; name of the new trustee; and an affidavit stating the old trustee was given a copy of the substitution.