In real estate law, Lien Theory is the legal concept followed in many states under which a mortgage is considered a lien against the property rather than a transfer of title. Under this theory, the borrower, known as the mortgagor, retains legal title and possession of the property while the loan is outstanding.
The lender holds only a security interest in the form of a lien, which can be enforced through foreclosure if the borrower defaults. Lien theory contrasts with title theory, where legal title is conveyed to the lender or trustee until the loan is repaid.
