What are the lien theory states?

In lien theory states, the deed stays with the borrower throughout the period of loan payments. The lender places a lien on the property using the mortgage. A lien is a right to keep possession of property belonging to another person until a debt owed is paid.

What is a lien theory state in contrast to a title theory state?

• In title theory states, mortgage lender has. legal title, the legal right to possession, and. thus has title to the rents implicitly. • By contrast, under lien theory, mortgage. lender has no implicit right, as mortgagee, to.

What is the lien theory?

What is lien theory? In lien theory states, the borrower holds the title to the property. Instead of a Deed of Trust, a Mortgage is recorded in the public record and acts as a lien against the property until the debt is paid off. With a mortgage, a homeowner has both legal and equitable title.

What is the difference between a lien and a title?

In a lien theory state, the buyer holds the deed to the property during the mortgage term The buyer promises to make all payments to the lender and the mortgage becomes a lien on the property, but title remains with the buyer. The lender’s lien is removed once the payment of all loan payments have been completed.

When to use title theory or lien theory?

Title Theory vs. Lien Theory States. When financing is involved in your real estate purchase, it is important to know whether you will be subject to the title or lien theory of mortgages. The law varies by state. Arizona, Nevada, Utah and California are all title theory states that use non-judicial foreclosure methods.

How are lien states different from title States?

In lien theory states, the buyer, who is also the borrower, will hold the deed to the real estate property for the life of the mortgage. The buyer promises to make payments on the mortgage according to the terms spelled out in the financing agreement.

Which is the only state that uses title theory?

The law varies by state. Arizona, Nevada, Utah and California are all title theory states that use non-judicial foreclosure methods. Title Theory — Non-Judicial Foreclosure. In a title state, the lending institution holds title to the property in the name of the borrower through a Deed of Trust.

How does title theory work on a mortgage?

In title theory states the lender holds title to the property in the name of the borrower through a Deed of Trust. When the loan is paid in full, the lender issues and records a Deed of Reconveyance, which clears the title of the property. In title theory states, the mortgage should contain a defeasance clause .