What is a deed of trust?

A deed of trust is a legal instrument that functions similarly to a mortgage but involves a third party known as a trustee. In a deed of trust, the borrower (trustor) conveys title to the property to the trustee, who holds it for the benefit of the lender (beneficiary). This means that the property title is not directly transferred to the mortgagee (lender) but rather to a trustee who acts as an intermediary. This structure adds a layer of protection for the lender, as they can initiate a foreclosure process through the trustee in case of default, often in a more streamlined fashion than with a traditional mortgage.

The other answers pertain to different concepts: transferring title directly to the mortgagee does not incorporate the role of a trustee; leasing contracts do not relate to property financing; and documents signifying outright ownership apply to different types of transactions, not involving the layered security provided by deeds of trust. Thus, the role of the trustee and the way the title is managed makes the second choice the correct one.