TITLE Theory States v LIEN Theory States
what does this all mean????
there are two basic theories of ownership under the various state property laws.
in a lien theory state, the borrower owns title to his or her home despite the outstanding mortgage obligation. in addition, the borrower holds the deed while they’re making the mortgage payments. they’re considered homeowners even though the bank has a security interest in their property.
in a title theory state, the borrower receives a deed to his or her home. however, they don’t actually keep title to the property during the term of the mortgage. In exchange for financing the home, the borrower allows the lender to hold the deed in trust pending payment of the loan. the borrower doesn't actually own the home until the mortgage has been paid and the lender releases the deed.
these competing ownership theories have a big impact on state foreclosure laws. in lien theory states, where the borrower is the rightful owner to the property, it's harder for a lender to foreclose on the home, and usually requires court oversight of the entire process.
in title theory states, where the property is technically owned by the lender, it's much easier for the lender to foreclose on the home through a more informal sale at the courthouse steps after a basic notice period.
ie example: (just because that is where the property we own is)...New Jersey is known as a lien theory state where the property acts as security for the underlying loan. the document that places the lien on the property is called a mortgage.
in title theory states, the lender already owns your house and all you have to do is give up the right to get it back. this is called the right of redemption. while you cannot force a lender to foreclose, you can eliminate the need to do so. since you have given up the right to get the property back, there is nothing to foreclose. the lender is now the owner.
this may be why some people are not getting foreclosed on as quickly as they think they should, or possibly NOT AT ALL!!!!
interesting stuff! now it puts the judicial and non- judicial processes a bit in prospective.
what does this all mean????
there are two basic theories of ownership under the various state property laws.
in a lien theory state, the borrower owns title to his or her home despite the outstanding mortgage obligation. in addition, the borrower holds the deed while they’re making the mortgage payments. they’re considered homeowners even though the bank has a security interest in their property.
in a title theory state, the borrower receives a deed to his or her home. however, they don’t actually keep title to the property during the term of the mortgage. In exchange for financing the home, the borrower allows the lender to hold the deed in trust pending payment of the loan. the borrower doesn't actually own the home until the mortgage has been paid and the lender releases the deed.
these competing ownership theories have a big impact on state foreclosure laws. in lien theory states, where the borrower is the rightful owner to the property, it's harder for a lender to foreclose on the home, and usually requires court oversight of the entire process.
in title theory states, where the property is technically owned by the lender, it's much easier for the lender to foreclose on the home through a more informal sale at the courthouse steps after a basic notice period.
ie example: (just because that is where the property we own is)...New Jersey is known as a lien theory state where the property acts as security for the underlying loan. the document that places the lien on the property is called a mortgage.
in title theory states, the lender already owns your house and all you have to do is give up the right to get it back. this is called the right of redemption. while you cannot force a lender to foreclose, you can eliminate the need to do so. since you have given up the right to get the property back, there is nothing to foreclose. the lender is now the owner.
this may be why some people are not getting foreclosed on as quickly as they think they should, or possibly NOT AT ALL!!!!
interesting stuff! now it puts the judicial and non- judicial processes a bit in prospective.
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to give that 3rd variation, and i should have known that although many attys never even mention these terms to their clients, you would know exactly what and how they work. i also think a point here is why the banks are in no hurry in the lien theory states, it's no sweat for them either way, so actually i would think it would more likely be the title theory states which act on foreclosures faster or the process is swift, since they do not have to go through the judicial system? did i miss something?
) . Of course things are moving much quicker here in NC with our primary home.
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