In a lien theory state, who is the owner of the real property interest during the life of the loan?

• A. Mortgagor is the owner of the real property interest
• B. Mortgagee holds ownership of the real property interest
• C. The property is owned by a trustee
• D. The lender gains ownership upon default

Answer: (A)

In a lien theory state, the borrower who gave the mortgage remains the owner of the real property during the life of the loan. The mortgage creates only a lien—a security interest on the property—not a transfer of title. The lender holds rights to foreclose the lien if the loan is not repaid, but title stays with the mortgagor until any foreclosure actually transfers ownership. The idea that the lender owns the property or that ownership shifts upon default is not correct; foreclosure is the process that can lead to the lender obtaining title, not automatic ownership just from the loan.