A California real estate class is discussing the promissory note and deed of trust. All of the following statements about the relationship between these two documents are correct EXCEPT:
Correct Answer
C) The deed of trust must be recorded to create the debt obligation between borrower and lender
This statement is FALSE. The debt obligation is created by the promissory note, not by recording the deed of trust. Recording the deed of trust provides constructive notice and establishes lien priority, but the debt exists as soon as the promissory note is signed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
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