A buyer in Slidell, Louisiana, is purchasing a home and asks her real estate agent whether Louisiana lenders use a deed of trust or a mortgage to secure the loan. What is the correct response?
Correct Answer
D) Louisiana lenders use a mortgage, which is a nonpossessory security right under the Civil Code
Louisiana uses a mortgage — not a deed of trust — as the security instrument for real estate loans. This is a direct result of Louisiana's Civil Code (civilian law) framework, which differs fundamentally from the common-law system used in most other states. Under La. Civil Code Art. 3278, a mortgage is a nonpossessory right created over property to secure the performance of an obligation. The borrower retains possession; no trustee holds title. This is one of the most fundamental distinctions between Louisiana and common-law states on the state exam.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
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