Question 1

What is the legal document that pledges real property as security for a loan without transferring title to the lender?

Accepted Answer

A mortgage (also called a deed of trust in some states) is the security instrument that pledges the property as collateral while the borrower retains title.

Question 2

In a deed of trust arrangement, who holds bare legal title to the property until the loan is repaid?

Accepted Answer

A neutral third party called the trustee holds bare legal title. The borrower (trustor) retains equitable title and the lender (beneficiary) holds the beneficial interest.

Question 3

What is the difference between the mortgagor and the mortgagee?

Accepted Answer

The mortgagor is the borrower who pledges the property as collateral. The mortgagee is the lender who receives the mortgage as security for the loan.

Question 4

What clause in a mortgage allows the lender to demand full repayment of the loan if the property is sold or transferred?

Accepted Answer

The due-on-sale clause (also called an alienation clause) prevents loan assumption without lender approval and requires full payoff upon transfer of ownership.

Question 5

What is the purpose of the defeasance clause in a mortgage?

Accepted Answer

The defeasance clause requires the lender to release the mortgage lien and return clear title to the borrower once the loan has been fully repaid.

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