What is the key difference between a "mortgage" and a "deed of trust"?

The distinction highlighted in the correct answer pertains to the role of a third party in the financing structure of real estate transactions. In a deed of trust, a third party—known as the trustee—holds the title to the property until the borrower repays the loan in full. This set-up effectively allows the trustee to facilitate the foreclosure process if the borrower defaults on the loan. The lender benefits from this arrangement as it provides a clear pathway for obtaining the property back without going through a lengthy court process.

In contrast, a mortgage typically involves only two parties: the borrower and the lender. The borrower retains title to the property while the lender has a lien against it as security for the loan. If the borrower defaults, the lender must go through the courts to foreclose on the property, which can be a more complex and time-consuming process.

In summary, the correct answer emphasizes the function of the third party in a deed of trust which is critical in understanding how these two types of agreements differ fundamentally in securing loans against real property.