What is the distinction between a "mortgage" and a "deed of trust"?

The distinction between a "mortgage" and a "deed of trust" primarily lies in the parties involved and the mechanism of the security interest. In a mortgage arrangement, there are typically two parties: the borrower (mortgagor) and the lender (mortgagee). The borrower pledges the property as collateral for the loan they are receiving from the lender.

In contrast, a deed of trust involves three parties: the borrower, the lender, and a third-party trustee. The trustee holds the title to the property until the loan is paid off. If the borrower defaults, the trustee has the authority to initiate foreclosure proceedings, selling the property to recover the funds for the lender. This three-party structure can facilitate the process of foreclosure in a deed of trust, making it a preferred method in some states.

The other options do not accurately capture the fundamental differences between these two forms of securing a loan. For example, the notion that a mortgage is secured by personal property is incorrect, as mortgages typically secure real property. Additionally, while both instruments achieve the same goal of securing a loan, they do so through different legal frameworks and documentation, which is more complex than simply differing in style. Lastly, the common usage of these instruments varies by