In title theory arrangements, the lender’s rights are manifested by which instrument?

• A. Mortgage
• B. Deed of trust
• C. Contract for deed
• D. Lease

Answer: (C)

In title theory arrangements, the lender’s rights come from the lender holding legal title to the property through a deed of trust. This three-party instrument involves the borrower (trustor), the lender (beneficiary), and a trustee who holds title on behalf of the lender. The borrower has equitable title and possession, but the legal title is in the hands of the trustee for the lender’s benefit, allowing foreclosure through the trustee if the loan is in default. A mortgage is more associated with lien theory, where the borrower retains title and the lender only has a lien. A contract for deed is seller financing that keeps title with the seller until full payment, and a lease is simply a rental agreement, not a loan security instrument.