Also known as: lien-theory · lien theory of mortgages
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage theory under which the mortgagor retains legal title to the property and the mortgage creates only a security lien in favor of the mortgagee. The mortgagee therefore holds no present right to possession or rents. Default alone does not shift title or control to the mortgagee.
Lucas Lee owns an apartment building and grants Linden Bank a mortgage on it. The jurisdiction follows lien theory. After Lee misses payments the bank notifies tenants to pay rent directly to it. Lee continues collecting the rents because legal title and the incidents of ownership remain with him until foreclosure is completed.
Lars Lindstrom borrows from a bank and mortgages his commercial building under lien theory. After default the bank appoints a receiver who begins collecting rents from Lindstrom's tenant. Lindstrom remains in possession and entitled to the rents because the mortgage creates only a lien and title stays with him until foreclosure concludes.
Select any source to read its text and confirm it supports the definition.
No. The mortgagor retains legal title and the right to possession and rents until foreclosure is completed. The mortgagee holds only a lien that must be enforced through foreclosure.
Supporting sources
No. The mortgagee has no present right to possession. The mortgagor keeps title and control until a foreclosure sale transfers ownership.
Supporting sources
Under lien theory the mortgagor retains legal title and possession until foreclosure. Under title theory the mortgagee receives legal title at execution and may assert possession upon default.
Supporting sources
Yes. Because the mortgage creates only a lien and does not transfer title, it does not sever the joint tenancy in lien-theory jurisdictions.
Supporting sources
…in the severance of the joint tenancy. We find, however, that implicit in Kling and our more recent cases which follow the lien theory of mortgages is the conclusion that a joint tenancy is not severed when one joint tenant executes a mortgage on his interest in the property, since the unity of title has been preserved. As the…