What does Title Theory indicate about a mortgage?

Title Theory posits that when a mortgage is executed, the ownership of the property is temporarily transferred to the lender. This transfer is not permanent and serves as collateral for the loan. The borrower retains possession of the property and usually has the right to live in and use it, but the lender holds the title until the mortgage is fully paid off.

In this framework, if the borrower defaults, the lender can reclaim full ownership through the foreclosure process. This contrasts with lien theory, where the borrower retains title to the property while the lender holds a lien against it to secure the debt. Understanding this distinction is crucial for anyone involved in real estate, as it influences the rights and responsibilities of both borrowers and lenders within mortgage agreements.