An affiliate broker in Chattanooga is representing a seller whose property is subject to a deed of trust. The seller asks the affiliate broker to explain the difference between a deed of trust and a mortgage in Tennessee. Which statement best describes the key structural difference?
Correct Answer
B) A deed of trust involves three parties (borrower, trustee, and lender), while a mortgage involves only two parties (borrower and lender).
A deed of trust involves three parties: the borrower (trustor), the trustee (a neutral third party who holds legal title), and the lender (beneficiary). A traditional mortgage involves only two parties: the borrower and the lender. Tennessee primarily uses deeds of trust, which enable non-judicial foreclosure through the power of sale clause held by the trustee.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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