Maria obtains a $320,000 mortgage loan from a Minnesota bank to purchase a home in St. Paul. After closing, Maria's neighbor asks who actually owns the home now that the bank has a mortgage on it. Which statement correctly describes the ownership situation under Minnesota law?
Correct Answer
D) Maria holds legal title to the home, and the bank holds a lien secured by the mortgage
Minnesota is a lien-theory (mortgage) state. When Maria signs a mortgage, she grants the lender a lien on the property as security for the debt, but she retains full legal title. The bank does not own the property — it holds a security interest (lien) that it can enforce through foreclosure if Maria defaults. This is the fundamental distinction between mortgage states and deed-of-trust states.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
More Financing Questions
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- → A Utah property has both a first mortgage and a second mortgage. If the first mortgage is foreclosed, what happens to the second mortgage?
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