Question 1

What is the primary security instrument used in California real estate transactions instead of a mortgage?

Accepted Answer

A deed of trust (trust deed), which involves three parties: the trustor (borrower), trustee (neutral third party), and beneficiary (lender).

Question 2

What is the difference between a promissory note and a deed of trust?

Accepted Answer

A promissory note is the borrower's personal promise to repay the debt (the IOU), while the deed of trust is the security instrument that pledges the property as collateral.

Question 3

Under a deed of trust in California, what is the foreclosure process called that does NOT require court action?

Accepted Answer

Nonjudicial foreclosure (also called foreclosure by trustee's sale or power-of-sale foreclosure), which is the most common foreclosure method in California.

Question 4

What is the reinstatement period under a California nonjudicial foreclosure, and when does it end?

Accepted Answer

The reinstatement period allows the borrower to cure the default by paying overdue amounts plus costs. It ends 5 business days before the scheduled trustee's sale.

Question 5

What is a 'due-on-sale' clause in a mortgage or deed of trust?

Accepted Answer

A due-on-sale (or alienation) clause requires the borrower to pay the full loan balance when the property is sold or transferred, preventing assumption of the loan without lender approval.

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