Concepts Definitions

• Conventional Loan: A type of mortgage loan that is not insured or guaranteed by a governmental agency. Conforming loans are a subcategory that meets Fannie Mae and Freddie Mac guidelines.
• Promissory Note: The primary written evidence of a debt, outlining the loan amount, interest rate, borrower’s name, and loan terms. It is essentially an “IOU” from the borrower to the lender.
• Trust Deed (Deed of Trust): A three-party security instrument commonly used in California. It involves the trustor (borrower), beneficiary (lender), and trustee (neutral third party) and creates a voluntary lien on real property, often including a power-of-sale clause for non-judicial foreclosure.
• Lending Institution (Primary Lender): Financial entities such as commercial banks, savings banks, thrift institutions, and credit unions that originate loans to consumers, typically sourcing funds from customer deposits.
• Beneficiary (in a Trust Deed): The lender in a deed of trust transaction, who benefits from the loan and holds the promissory note.
• Trustee (in a Trust Deed): The neutral third party in a deed of trust who holds legal title (naked title) to the property as security for the loan, on behalf of both the borrower and the lender. The trustee’s role is to facilitate the release of the lien upon loan repayment or to conduct a foreclosure sale upon default.
• Naked Title (Bare Title): The form of legal title held by the trustee in a deed of trust, which grants no possessory rights or active ownership to the trustee, but allows them to act as an intermediary in managing the security for the loan.

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