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 beneficiary is the lender, and the trustee holds limited authority under the security instrument rather than ordinary ownership of the property. A deed of trust can be foreclosed judicially or through its power of sale. A completed nonjudicial sale bars the foreclosing creditor's deficiency on that debt. Judicial foreclosure may permit a deficiency and post-sale redemption, but redemption is unavailable when a deficiency is waived or prohibited under Code of Civil Procedure section 726(e).
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
A mortgage directly involves mortgagor and mortgagee. Without a power of sale it requires judicial foreclosure; with that power, nonjudicial foreclosure can be available.
See also
Test the distinction
A relevant question from Financing, selected because its facts or explanation use this concept.
A California deed of trust contains a power of sale. What practical difference does that power create after default?
Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanor under B&P Code section 123.
Primary sources
Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.