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Real Property • Security Interests in Real Estate
PROP#218
Legal Definition
In intermediate theory states, the mortgagor holds legal title until default, but upon default legal title is in the mortgagee, who may demand possession.
Plain English Explanation
A mortgagee (the lender) can take possession of a property and start collecting rents before foreclosure under certain legal theories, depending on the state. Here's how it breaks down:
(1) Title theory: In title theory states, the mortgage gives the lender legal ownership of the property, while the borrower only has possession until they default. So, if the borrower defaults on the loan, the lender can take possession of the property and start collecting rents before foreclosure because they technically already hold the title.
(2) Intermediate theory: In these states, the lender gets the title to the property when the borrower defaults, but they don’t have ownership until that happens. So, if the borrower misses payments, the lender can step in, take possession, and collect rents before going through the full foreclosure process.
(3) Lien theory: In lien theory states, the mortgage is treated as a lien on the property rather than giving the lender ownership. The borrower keeps title and possession of the property unless and until foreclosure happens. So, the lender cannot take possession or collect rents before foreclosure in these states.
(1) Title theory: In title theory states, the mortgage gives the lender legal ownership of the property, while the borrower only has possession until they default. So, if the borrower defaults on the loan, the lender can take possession of the property and start collecting rents before foreclosure because they technically already hold the title.
(2) Intermediate theory: In these states, the lender gets the title to the property when the borrower defaults, but they don’t have ownership until that happens. So, if the borrower misses payments, the lender can step in, take possession, and collect rents before going through the full foreclosure process.
(3) Lien theory: In lien theory states, the mortgage is treated as a lien on the property rather than giving the lender ownership. The borrower keeps title and possession of the property unless and until foreclosure happens. So, the lender cannot take possession or collect rents before foreclosure in these states.
Related Concepts
How do states treat a mortgage without a note?
How do states treat a note without a mortgage?
How is a mortgage's priority determined?
How may a party be a holder in due course of a note?
In lieu of foreclosure, what do many installment contracts prefer and how do courts address this alternative?
Under which theories may a mortgagee take possession of a property and begin receiving rents before foreclosure?
What are the 5 types of security interests in real estate?
What are the benefits of the holder in due course status?
What are the limitations of a junior interest?
What are the methods of transferring a note?
What interests does a foreclosure destroy?
What is a deficiency judgment?
What is a due on sales clause?
What is a foreclosure?
What is an installment land contracts?
What is a receivership?
What is a redemption in equity?
What is a statutory redemption?
What is the distribution order of proceeds from a foreclosure?
What is the result of a grantee assuming the mortgage?
What liabilities are associated with a mortgaged property that is transferred to another party?
What occurs in lien theory states?
What occurs in title theory states?
What results from a party purchasing a foreclosed property subject to a senior interest?
What security interests exist under a absolute deed?
What security interests exist under a deed of trust?
What security interests exist under a installment land contract?
What security interests exist under a mortgage?
What security interests exist under a sale-leaseback?
Who may transfer their interest in a mortgage?
