What distinguishes a mortgage from a deed of trust?

The choice highlighting that a mortgage involves two parties while a deed of trust involves three is correct due to the fundamental structural differences between these two types of financing instruments.

In a mortgage agreement, there are typically two parties involved: the borrower (mortgagor) who receives the loan and the lender (mortgagee) who provides the funds. The mortgage creates a lien on the property as security for the loan, which means that if the borrower defaults, the lender has the right to foreclose and reclaim the property.

In contrast, a deed of trust involves three distinct parties: the borrower (trustor), the lender (beneficiary), and a neutral third-party trustee. The trustee holds the legal title to the property on behalf of the lender until the borrower repays the loan in full. This structure provides an additional layer of security for the lender and a more streamlined process in the event of a default, as it allows for non-judicial foreclosure procedures.

Understanding the roles of the parties involved helps clarify the operational mechanics of each financing instrument and is essential for real estate transactions.