Two buyers purchase adjacent properties in Prince George's County on the same day. Buyer A uses a deed of trust, and Buyer B uses a traditional mortgage. Both buyers default two years later, and both lenders want to foreclose. Which statement most accurately describes the difference in foreclosure options available to each lender under Maryland law?
Correct Answer
A) Lender A may use non-judicial trustee's sale; Lender B must use judicial foreclosure through the circuit court
In Maryland, the type of security instrument determines the available foreclosure method. Lender A, holding a deed of trust, may conduct a non-judicial foreclosure through a trustee's sale because the trustee holds legal title and has the power of sale built into the deed of trust instrument. Lender B, holding a traditional mortgage, must pursue judicial foreclosure through the circuit court because there is no trustee with a power of sale — the lender holds only a lien on the property, not title. This distinction is a key reason deeds of trust are preferred in Maryland.
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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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