A Maryland lender is considering whether to use a deed of trust or a traditional mortgage for a new residential loan in Carroll County. The lender's primary concern is minimizing the time and cost of foreclosure if the borrower defaults. Which instrument should the lender choose, and why?
Correct Answer
A) A deed of trust, because the trustee's power of sale enables non-judicial foreclosure without a full court proceeding
A deed of trust is the correct choice for a lender concerned about foreclosure efficiency. Because the borrower conveys legal title to a trustee who holds a power of sale, the lender (beneficiary) can direct the trustee to conduct a non-judicial foreclosure sale upon default without filing a full lawsuit. While Maryland courts do ratify foreclosure sales, the non-judicial process is significantly faster and less expensive than the full judicial foreclosure required for traditional mortgages. This is why deeds of trust are the dominant security instrument in Maryland.
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Related Topics & Key Terms
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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.
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