In California, a deed of trust involves three parties. Who holds legal title until the loan is paid off?

Understanding deed of trust structures is fundamental in California real estate practice because it directly impacts property rights, foreclosure processes, and transactional procedures. This question tests your knowledge of the three-party relationship in a deed of trust arrangement - a common security instrument in California. The correct answer requires recognizing that legal title is held separately from equitable title (held by the borrower). The trustee's role as a neutral third party holding legal title creates a safety mechanism for lenders while protecting borrowers from lender overreach. This distinction is particularly important in foreclosure scenarios, where understanding who holds what rights determines the proper procedure. The question challenges students who may confuse the roles of trustee and beneficiary, or who may incorrectly apply mortgage terminology (where the lender holds legal title) to California's deed of trust system. Understanding this concept connects to broader knowledge of security instruments, foreclosure processes, and title theory states versus lien theory states.