Patricia is purchasing a home in Conway, Arkansas. Her lender explains that the loan will be secured by a deed of trust. Patricia asks who will hold legal title to her home during the loan repayment period. Which answer is correct?
Correct Answer
C) The trustee will hold legal title while Patricia retains equitable title and the right of possession
In a deed of trust arrangement under Ark. Code Ann. § 18-50-101 et seq., the trustor (borrower, Patricia) conveys legal title to the trustee — a neutral third party. Patricia retains equitable title and the right to possess and use the property throughout the loan repayment period. When the loan is fully repaid, the trustee reconveys legal title back to Patricia through a deed of reconveyance.
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Related Topics & Key Terms
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Related Concepts
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
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