Check Your Understanding Answers
- What is a deed of trust?
A deed of trust is a legal document which transfers title to a property to a third-party trustee as security for an obligation owed by the trustor (the borrower) to the beneficiary (the lender).
- List two reasons that lenders prefer to use the deed of trust when making loans. (See other correct answers on page 12.)
A trustee may be given the power to sell property after default without going through the time-consuming judicial foreclosure process.
A deed of trust can be used to secure more than one note.
- Define acceleration.
If the borrower violates any of the covenants of the contract, the beneficiary may call for payment of the loan in full and the trustee may sell the property after he or she has filed all the proper notices.
- List two differences between a mortgage and a deed of trust. (See other correct answers on page 15.)
- A mortgage is a lien on the property being given as collateral, with the legal title remaining in the name of the borrower. In a deed of trust, the borrower conveys the property to the trustee, who holds the title to the collateral on behalf of the lender until the loan terms have been satisfied.
- A mortgage may be discharged by a simple acknowledgement that the loan terms have been satisfied. A deed of trust is discharged using a reconveyance of title form.
