Title-Theory State

State in which the law splits the title to mortgaged property into legal title, held by the lender, and equitable title, held by the borrower. The borrower gains full title to the property upon retiring the mortgage debt. In a title-theory state, mortgage lenders may possess the property upon default of the borrower. In a Lien-Theory State, lenders must go through the process of foreclosure.

States in which the law splits the Title of mortgaged property into legal title, held by the lender, and Equitable Title held by the borrower. The borrower gains full title to the property upon Retiring the mortgage debt. The lender is granted more immediate cure to a Default than in Lien Theory States. Contrast with Lien Theory States.
Example: In title theory states, mortgage lenders may possess the property upon default of the borrower. InLien Theory States lenders must go through the process of Foreclosure.