FinanceIntermediateCalifornia Exam

A deed of trust in California differs from a mortgage primarily because:

AA deed of trust has lower interest rates

BA deed of trust involves three parties and allows non-judicial foreclosureCorrect

CA mortgage cannot be used for residential property

DA deed of trust requires court approval to create

Why A deed of trust involves three parties and allows non-judicial foreclosure Is Correct

Answer B: A deed of trust involves three parties and allows non-judicial foreclosure

A deed of trust involves three parties: trustor (borrower), trustee (neutral third party), and beneficiary (lender). The key advantage is non-judicial foreclosure (trustee's sale) which is faster than judicial foreclosure required for mortgages.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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Key Terms to Know

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Short Sale

A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.