Which deed is used to convey title to a trustee as security for a loan?

• A. Deed of Trust
• B. Deed in Trust
• C. Bargain & Sale Deed
• D. Quitclaim Deed

Answer: (A)

When a loan is secured with real estate, the instrument used to place title in the hands of a third party to hold as security is a deed of trust. In this setup, the borrower transfers legal title to a trustee, while the lender is the beneficiary. The trustee holds the title until the loan is repaid, and if the borrower defaults, the trustee can initiate foreclosure, often through a power of sale that doesn’t require court action in many states. This arrangement makes it a fast and efficient way to secure financing with real property.

Some jurisdictions use a deed in trust that serves a similar function, but the form most commonly tested as the mechanism for conveying title to a trustee to secure a loan is the deed of trust. In contrast, a bargain and sale deed transfers title with limited or no warranties and isn’t designed to create a security interest for a loan, and a quitclaim deed transfers whatever interest the grantor has with no warranties or protection for a lender.