Karen obtains a $280,000 loan from First Prairie Bank to purchase a home in Bismarck, North Dakota. She signs a promissory note and a mortgage. Which of the following best describes Karen's legal status with respect to the property during the loan repayment period?
Correct Answer
A) Karen holds legal title to the property subject to the bank's mortgage lien
Under North Dakota mortgage law, the mortgagor (borrower) retains legal title to the property. The mortgage does not transfer title to the lender; instead, it creates a lien on the property in favor of the lender. Karen holds full legal title subject to the bank's lien. This lien theory of mortgages is the foundation of North Dakota's requirement for judicial foreclosure under NDCC Chapter 32-19 — because the lender never holds title, it must go to court to enforce its security interest.
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