Under Indiana's lien theory of mortgages, which party holds legal title to the property during the term of the mortgage loan?
Correct Answer
D) The borrower (mortgagor) retains legal title, and the mortgage creates only a lien on the property
Indiana follows the lien theory of mortgages. Under this theory, the borrower (mortgagor) retains full legal title to the property throughout the loan term. The mortgage does not transfer ownership to the lender; instead, it creates a lien (a security interest) on the property. The lender (mortgagee) only has a lien right, not ownership. This is why judicial foreclosure is required — the lender must go to court to enforce the lien and compel a sale.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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