Chapter 10—Deed of Trust
MULTIPLE CHOICE
1. A neutral third party would be found in
a.
a regular mortgage.
b.
an equitable mortgage.
c.
a deed of trust.
d.
a land sale contract.
2. A deed given as security for the loan against real estate is known as
a.
a trust deed.
b.
illegal consideration.
c.
usury.
d.
hypothecated.
3. A trust deed can be used for all of the following EXCEPT
a.
transfer of title.
b.
hypothecate property.
c.
secure a note.
d.
secure a mortgage.
4. A newly recorded trust deed
a.
conveys the entire estate to the grantee.
b.
always allows a deficiency judgement.
c.
establishes a voluntary lien.
d.
conveys title superior to a quitclaim deed.
5. One of the main differences between a regular mortgage and a deed of trust is
a.
the number of parties.
b.
rights of possession.
c.
recording.
d.
ownership.
6. The instrument which conveys naked title to a trustee is the
a.
notice of default.
b.
reconveyance deed.
c.
guardian’s deed.
d.
trust deed.
7. The borrower under a deed of trust is called the
a.
trustor.
b.
beneficiary.
c.
trustee.
d.
grantor.
8. Who is the trustor in a deed of trust?
a.
Borrower
b.
Lender
c.
Grantor
d.
Vendor
9. A trustor’s relationship to a beneficiary is most nearly the same as a
a.
grantor to a grantee.
b.
beneficiary to a trustee.
c.
buyer to a seller.
d.
mortgagor to a mortgagee.
10. The borrower under a deed of trust arrangement is called the
a.
trustor.
b.
beneficiary.
c.
trustee.
d.
holder in due course.
11. When a property is financed by means of a deed of trust, to whom are the payments made?
a.
Beneficiary
b.
Trustor
c.
Trustee
d.
Grantee
12. A trustor’s relationship to a beneficiary is most nearly the same as a
a.
grantor to a grantee.
b.
beneficiary to a trustee.
c.
buyer to a seller.
d.
mortgagor to a mortgagee.
13. When a loan is secured by deed of trust, the promissory note is held by the
a.
beneficiary.
b.
trustor.
c.
trustee.
d.
grantee.
14. With regard to a deed of trust, the trustee
a.
can be the beneficiary.
b.
receives recorded title.
c.
receives equitable title.
d.
receives naked title.
15. The trustee of a deed of trust
a.
may be the beneficiary.
b.
may bid at the foreclosure sale.
c.
has naked title.
d.
always knows of his appointment.
16. A deed of trust conveys naked title to the
a.
beneficiary.
b.
trustor.
c.
trustee.
d.
escrow officer.
17. A trustor’s relationship to a beneficiary is most nearly the same as a
a.
grantor to a grantee.
b.
beneficiary to a trustee.
c.
buyer to a seller.
d.
mortgagor to a mortgagee.
18. When a debt secured by a deed of trust is paid off, naked legal title reverts to the borrower from the
a.
mortgagee.
b.
trustor.
c.
beneficiary.
d.
trustee.
19. Under a deed of trust, reconveyance is issued by the
a.
beneficiary.
b.
trustor.
c.
trustee.
d.
borrower.
20. Upon payment of the debt secured by a deed of trust, the
a.
trustor issues a deed for reconveyance.
b.
grant deed is issued to the trustee.
c.
trustee issues a release deed for reconveyance.
d.
trustor now has equitable title.
21. A deed for reconveyance would be signed by the
a.
beneficiary.
b.
trustor.
c.
trustee.
d.
grantee.
22. Who must sign the reconveyance of a deed of trust?
a.
Beneficiary
b.
Trustor
c.
Trustee
d.
Grantee
23. Upon payment of the debt secured by a deed of trust, the
a.
trustor issues a deed for reconveyance.
b.
grant deed is issued to the trustee.
c.
trustee issues a release deed for reconveyance.
d.
trustor now has equitable title.
24. When default is declared on a loan secured by deed of trust, which of the following is true?
a.
The trustee must sell the property at a private sale.
b.
The successful bidder at the trustee’s sale receives a trustee’s deed at the time of sale.
c.
The defaulting borrower has a one year period of redemption after the trustee’s sale.
d.
After a year, the successful bidder at the trustee’s sale receives a trustee’s deed.
25. The beneficiary’s right, upon default, to take physical possession and collect income generated by the
property is called
a.
assignment of rents.
b.
reconveyance.
c.
power of sale.
d.
the trustee has the right, not the beneficiary.
26. A borrower defaults on a deed of trust loan. Before the lender can foreclose, the lender must
a.
offer to modify the loan terms to allow the borrower to catch up.
b.
appoint a trustee if the deed of trust is of the automatic trustee form.
c.
notify the borrower, trustee and all interested parties of the default.
d.
advertise the sale several weeks in advance and perform the sale himself, on the site of the
property securing the loan.
27. Under a deed of trust on real property, the trustee is
a.
the owner of record of the property covered by the deed of trust.
b.
empowered to foreclose, upon notice of default, by a trustee’s sale of the property.
c.
the equitable owner of the property.
d.
the holder of the grant deed.
28. After a trustee’s sale has been held and the property goes to the highest bidder, in most states the
original trustor has
a.
21 days to pay off the loan balance.
b.
90 days equity of redemption.
c.
one year to redeem the property.
d.
no recourse.
29. When a person signs a note with no guarantee to the person receiving it, he is said to be signing it
a.
with recourse.
b.
without recourse.
c.
in blank.
d.
jointly and severally.
30. One of the major differences between a regular mortgage and a deed of trust is
a.
a mortgage hypothecates personal property.
b.
a deed of trust must be recorded.
c.
the redemption period allowed.
d.
there is no difference.
TRUE/FALSE
1. A trust deed can be used to secure a mortgage.
2. A deed of trust can never be foreclosed judicially.
3. The borrower under a deed of trust is called the beneficiary.
4. In a real estate transaction financed with a deed of trust, the real property is conveyed by the deed of
trust.
5. The funds for a loan secured by a deed of trust are supplied by the beneficiary.
6. In a real estate transaction financed with a deed of trust, the grantee on the deed of trust is the
borrower.
7. The borrower receives naked title under a deed of trust.
8. A deed of trust lien, when paid in full, is released by the recording of a reconveyance deed.
9. Upon default by the borrower under a deed of trust, the trustor issues a notice of default.
10. A mortgage can be foreclosed judicially.
11. Regarding the non-judicial foreclosure of a deed of trust, the property is sold at auction.
12. If an owner pays the full amount of the debt just before his property is sold at auction, he is probably
exercising his right of redemption.
13. Mortgages are the same as trust deeds in that foreclosure is the cure for default.
14. One major advantage of a deed of trust over a mortgage is the time between default and foreclosure is
relatively short.
15. The presence of a power of sale right prohibits the trustee from using a court-ordered foreclosure.
16. Proceeds from a foreclosure sale go first to the lender, then to the borrower and then to the expenses of
the sale.
17. In the automatic form of trusteeship, the trustee is named in the deed of trust but is not personally
notified of the appointment.
18. In a deed of trust, if the borrower defaults, the lender can take possession of the property and collect
the rents.
19. The basic purpose of the deed of trust is the same as a mortgage.
20. The title that the borrower grants to the trustee is referred to as “naked title”.
COMPLETION
1. The basic purpose of the deed of trust, also referred to as a trust deed, is the same as a
____________________.
2. Under a deed of trust the borrower is known as the ____________________.
3. Under a deed of trust, the lender is known as the ____________________.
4. The trustee in a deed of trust is a neutral ____________________ party.
5. The title that the borrower grants to the trustee is sometimes called ____________________ or
____________________ title.
6. When the debt is paid off the lender sends to the trustee the note, the deed of trust and a request for
____________________.
7. Under the ____________________ of ____________________ clause, if the borrower defaults, the
trustee has the right to sell the property and convey ownership to the purchaser.
8. The right to collect rents in the event of default is called a(n) ____________________ of
____________________ clause.
9. If the borrower defaults, the trustee has the right to sell the property and convey ownership to the
purchaser with a ______________________________.
10. After the expenses of the sale are paid in a foreclosure sale, the ____________________ is paid.
MATCHING
Choose the one most appropriate answer for each.
a.
accepted form
k.
no statutory redemption
b.
assignment of rents
l.
power of sale
c.
automatic form
m.
public trustee
d.
bare title
n.
reconveyance deed
e.
beneficiary
o.
release deed
f.
deed of trust
p.
request for reconveyance
g.
default
q.
trust
h.
foreclosure
r.
trustee
i.
junior claims
s.
trustee’s deed
j.
naked title
t.
trustor
1. a document that conveys legal title to a neutral third party as security for a debt
2. one who creates a trust; the borrower under a deed of trust
3. the lender
4. one who holds property in trust for another
5. transfers title from the trustee to the trustor
6. a publicly appointed official who acts as a trustee in some states
7. the trustee is named in the deed of trust but not personally notified of the appointment
8. title in a legal sense only and without the usual rights of ownership
9. the beneficiary’s request to the trustee to deed the secured property to the trustor
10. a clause in a deed of trust that gives the trustee the right to conduct a foreclosure sale without first
going to court
11. the lender’s right to take possession and collect rents in the event of loan default
12. conveys to the purchaser at foreclosure the right, title, and interest held by the trustee
13. title that the borrower grants to the trustee; also known as naked title.
14. any claim behind a first lien
15. the trustee is notified in advance and either accepts or rejects the appointment
16. what the trustee issues to the borrower; also known as a reconveyance deed
17. violation of any of the terms of the deed of trust
18. the process of selling the mortgaged property allowed under the deed of trust
19. usually not allowed once the foreclosure sale takes place
20. a three party arrangement involving a trustor, trustee, and beneficiary