In real estate law, title theory is a legal concept followed in certain states under which the mortgagee holds legal title to the property during the term of the mortgage. The mortgagor retains equitable title and the right to possession and use of the property.
Under title theory, legal title remains with the lender until the loan is fully repaid. Once the debt is satisfied, legal title is transferred back to the borrower, typically through a release or reconveyance.
