What is meant by a 'lien-theory' state?

• A. A state in which liens are given priority over other encumbrances
• B. A state in which a mortgagor retains title to the property when a mortgage lien is created
• C. A state in which the holder of a mortgage lien receives title to the mortgaged property until the debt is satisfied
• D. A state in which liens exist in theory but not in practice

Answer: (B)

In a lien-theory state, the borrower keeps title to the property even after the mortgage is created. The mortgage creates a lien as security for the debt, but ownership remains with the mortgagor unless foreclosure occurs. That’s why describing the mortgagor as retaining title when the mortgage lien is created is the correct definition. The other statements mix in how liens are prioritized or when title transfers, which are different concepts from what lien theory specifically states—lien priority depends on recording dates, and the lender does not hold title simply because a lien exists.