Financing, 9% of the examination
Deed of trust
The three-party security instrument that dominates California lending, allowing a non-judicial trustee's sale.
The trustor is the borrower, the trustee holds bare legal title as a neutral third party with power of sale, and the beneficiary is the lender. A mortgage has only two parties, which is why it needs a court to foreclose. Choosing a trustee's sale is faster but gives up the right to a deficiency judgment, while judicial foreclosure preserves that right and gives the borrower a post-sale redemption period.
What this is confused with
The exam rarely asks for a definition. It describes a situation and offers two terms that both sound plausible.
Mortgage
Two parties, and foreclosure requires a court action.
See also
See it in a question
One question from Financing, so the term lands in the context the exam uses it in.
California lenders overwhelmingly use a deed of trust rather than a mortgage. What practical difference matters most to a defaulting borrower?
Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.