Which security instrument uses a trustee and allows foreclosure without court action in many states?

Which security instrument uses a trustee and allows foreclosure without court action in many states?

• A. Mortgage
• B. Promissory note
• C. Title insurance
• D. Deed of trust

Answer: (D)

A deed of trust uses three parties—the borrower (trustor), the lender (beneficiary), and a neutral trustee who holds legal title. If the borrower defaults, the trustee can proceed with a trustee’s sale without going through the court system, which is known as a non-judicial foreclosure and is available in many states. This arrangement makes foreclosure typically faster and less costly than the judicial process often associated with a mortgage. In a mortgage, the lender and borrower secure the loan with a lien, and foreclosure usually proceeds through the courts. A promissory note is simply the written promise to repay the loan and isn’t itself the security instrument that governs foreclosure. Title insurance protects the property's title but does not dictate how foreclosure is carried out.

A deed of trust uses three parties—the borrower (trustor), the lender (beneficiary), and a neutral trustee who holds legal title. If the borrower defaults, the trustee can proceed with a trustee’s sale without going through the court system, which is known as a non-judicial foreclosure and is available in many states. This arrangement makes foreclosure typically faster and less costly than the judicial process often associated with a mortgage.

In a mortgage, the lender and borrower secure the loan with a lien, and foreclosure usually proceeds through the courts. A promissory note is simply the written promise to repay the loan and isn’t itself the security instrument that governs foreclosure. Title insurance protects the property's title but does not dictate how foreclosure is carried out.