Lien theory state

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Lien theory state
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Lien Theory state the buyer holds the deed to the property during the mortgage term. The mortgage becomes a lien on the property, but title remains with the buyer. When buyers repays the loan acquires only a lien on the property but both legal and equitable title are retains the borrower. Also foreclosure proceedings is removed when of all loan payments have been completed (J.I. Wiedemer, p.44). So, security for the loan is the mortgage. What is important lender's cannot impact sale of the collateral to satisfy the loan but if the debt and mortgagee's claims will be satisfy then sale of the mortgaged property is possible (D.B. Burke, J. A. Snoe,p.398).

Theory of mortgages

Other theories of mortgage security:

  • Title Theory State

Other theory refers to the concept of mortgage is title theory. In this theory the mortgagee holds title of the property until mortgage has been satisfied. So, actually the borrower do keep title to the property during the loan term (D. A. Schmudde, p.7).

  • Intermediary Theory State

There are also some states which adopted hybrid philosophy. Intermediary theory state is a combination of lien and title theory state. The borrower holds the title during the mortgage, but the lender can take it away if the buyer defaults on the mortgage ( Real Estate Principles, p. 271).

Difference between those theories is more theoretical than practical. Regardless of the theory, the borrower lose title of the property when the loan is not repaid ( Real Estate Principles, p. 271).

States by theory

In the United States, more states are lien-theory states only few states follow other two theories

Theory State
Lien Theory State Alaska, Minnesota, Oklahoma, Alabama, Missouri, Oregon, California, Montana, South Carolina, Colorado, Nebraska, Florida, Nevada, South Dakota, Idaho, Hawaii, New Hampshire, Texas, Indiana, New Mexico, Utah, Washington, Iowa, Kansas, New York, West Virginia, Wisconsin, Kentucky, North Dakota, Louisiana, Wyoming, Michigan, Ohio
Title Theory State Georgia, Maine, Maryland, Mississippi, Pennsylvania, Rhode Island, Tennessee, Vermont
Intermediary Theory State Arkansas, Connecticut, Delaware, Washington D.C., Ilinoi, Massachusetts, New Jersey, North Carolina, Virginia

( Own elaboration based on J.I. Wiedemer, p. 45)


Author: Wioletta Szymska