Title Theory

In a Title State, the lender holds title to the property in the name of the borrower through a Deed of Trust. When the loan is completely paid off, the lender issues and records a Deed of Reconveyance in favor of the borrower who then has clear title to the property. The Deed of Reconveyance removes any interests that the lender may have in the property.

Title Theory States:

  • Alaska
  • Arizona
  • Colorado
  • Washington D.C.
  • Georgia
  • Idaho
  • Mississippi
  • Missouri
  • Nebraska
  • Nevada
  • North Carolina
  • Oregon
  • South Dakota
  • Tennessee
  • Texas
  • Utah (Arguable. Read this article to learn more)
  • Virginia
  • Washington State
  • West Virginia
  • Wyoming


Lien Theory

In a Lien State, the deed stays with the borrower, and the lender places a lien on the property using the mortgage. The lien is extinguished when the loan is paid off in full.

Lien Theory States

  • Arkansas
  • California
  • Connecticut
  • Delaware
  • Florida
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • New Mexico
  • New York
  • North Dakota
  • Ohio
  • New Jersey
  • Pennsylvania
  • Puerto Rico
  • South Carolina
  • Wisconsin

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Generally, foreclosure in Title States occurs through a non-judicial proceeding, while Lien States are conducted via judicial methods. Each state is different!


Intermediary Theory

In intermediary theory states, the borrower retains the title with the express agreement that the lender can take back the title when the borrower defaults on the loan.

Intermediary Theory States:

  • Alabama
  • Hawaii
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Montana
  • New Hampshire
  • Oklahoma
  • Rhode Island
  • Vermont