In a deed of trust arrangement, which statement correctly describes the mechanics?

• A. The borrower retains full title throughout the loan
• B. The title company directly issues the loan
• C. The trustee holds the title for the benefit of the lender to secure the loan
• D. The beneficiary holds the title and acts as trustee

Answer: (C)

In a deed of trust, three players work together: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee). The main idea is that the property’s title is held by the trustee, not by the borrower, for the benefit of the lender to secure the loan. The borrower still has the right to possess and use the property and keeps equitable title, but the legal title sits with the trustee until the loan is paid off. If the borrower defaults, the trustee can sell the property under the power of sale to recover the loan, often without going through a court, depending on state law. This arrangement explains why the statement that the trustee holds the title for the benefit of the lender to secure the loan is correct. The other notions aren’t accurate: the borrower does not retain full title while the loan is outstanding, the loan isn’t issued by a title company, and the beneficiary is not the one who holds the title as trustee.