Loan instruments
Lien theory
The borrower keeps legal title and the lender holds a lien against the property
The majority approach. Because the lender holds only a security interest rather than title, taking the property back generally requires a court — which is why lien theory states tend to use judicial foreclosure.
How the exam asks about it
Set against title theory, where legal title passes to the lender until repayment, and against the intermediate deed of trust arrangement.
Related terms
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