A Washington State managing broker is training a new broker about the differences between a mortgage and a deed of trust. Which of the following statements correctly identifies a key distinction between these two instruments as they apply in Washington under RCW 61.24?
Correct Answer
D) A deed of trust involves three parties and allows non-judicial foreclosure, while a mortgage involves two parties and typically requires judicial foreclosure.
A deed of trust involves three parties: the trustor (borrower), the trustee (neutral title holder), and the beneficiary (lender). This three-party structure enables non-judicial foreclosure because the trustee already holds legal title and has the power of sale. A mortgage, by contrast, involves two parties (mortgagor and mortgagee) and typically requires judicial foreclosure through the courts. Washington uses deeds of trust almost exclusively under RCW 61.24 to take advantage of the faster non-judicial process.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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%.
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