According to Real Estate Wiki (www.RealEstateWiki.com) in a lien-theory state, the borrower receives the deed to the property at the closing and the lender establishes a lien position on the property by recording the note and mortgage. Should the borrower default, the mortgage gives the lender the right to foreclose on the property, the note determines how much money the lender can collect and the lien establishes the order in which the lenders are paid.
In a title-theory state, the law construes the lender to have legal title to the property and the borrower to have an equitable title. Because the lender holds the title to the property, the lender has the right to possession of the property on default.
For over 1,000 additional “Frequently Asked Questions” about the home buying, owning, selling and renting process, visit www.RealEstateWiki.com. Real Estate Wiki is an online encyclopedia, glossary, dictionary and wiki dedicated to providing quality free information to all those who have real estate questions.
