During a pre-licensing class, an instructor explains the parties involved in a Maryland deed of trust. A student asks how many parties are involved in a deed of trust compared to a traditional mortgage. Which answer correctly identifies the parties in each instrument as used in Maryland?
Correct Answer
A) A mortgage has two parties (mortgagor and mortgagee); a deed of trust has three parties (trustor, trustee, and beneficiary)
A traditional mortgage involves two parties: the mortgagor (borrower) and the mortgagee (lender). A Maryland deed of trust involves three parties: the trustor (borrower who conveys title), the trustee (neutral third party who holds legal title), and the beneficiary (lender who holds the beneficial interest). This three-party structure is the defining feature of a deed of trust and enables non-judicial foreclosure.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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