Which instrument involves transferring property to a trustee with power of sale, securing the loan?

Which instrument involves transferring property to a trustee with power of sale, securing the loan?

• A. Wraparound Mortgage
• B. Deed of Trust
• C. Mortgage Subordination Agreement
• D. Contract for Deed

Answer: (B)

When a property is put into the hands of a trustee to secure a loan and the lender has the power to sell if the borrower defaults, the instrument being used is a deed of trust. In this arrangement the borrower transfers legal title to a trustee, who holds it to secure the lender’s interest. If the borrower fails to meet the loan obligation, the trustee has the authority to sell the property under a power-of-sale clause, typically without going through a court process. This non-judicial foreclosure route accelerates recovery for the lender and is a hallmark of deeds of trust in many states. Other instruments don’t fit this scenario as neatly. A wraparound mortgage is a financing method that adds a new loan on top of an existing one but doesn’t involve transferring title to a trustee with power of sale. A mortgage subordination agreement changes priority between liens, not who holds title or who can sell the property. A contract for deed involves the seller retaining legal title until full payment is made, with the buyer gaining equitable ownership gradually, which again isn’t about a trustee with power of sale.

When a property is put into the hands of a trustee to secure a loan and the lender has the power to sell if the borrower defaults, the instrument being used is a deed of trust. In this arrangement the borrower transfers legal title to a trustee, who holds it to secure the lender’s interest. If the borrower fails to meet the loan obligation, the trustee has the authority to sell the property under a power-of-sale clause, typically without going through a court process. This non-judicial foreclosure route accelerates recovery for the lender and is a hallmark of deeds of trust in many states.

Other instruments don’t fit this scenario as neatly. A wraparound mortgage is a financing method that adds a new loan on top of an existing one but doesn’t involve transferring title to a trustee with power of sale. A mortgage subordination agreement changes priority between liens, not who holds title or who can sell the property. A contract for deed involves the seller retaining legal title until full payment is made, with the buyer gaining equitable ownership gradually, which again isn’t about a trustee with power of sale.