Also known as: title-theory · title theory of mortgages
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage theory under which the mortgagee holds legal title to the mortgaged property while the mortgagor retains only an equity of redemption. Default permits the mortgagee to assert immediate possession and collect rents without first completing foreclosure.
True North Logistics mortgaged its warehouse to Threshold Capital under a recorded instrument. After True North missed three payments, Threshold notified the company that the mortgage had transferred legal title and demanded that True North and its subtenant vacate the premises at once. Threshold then changed the locks and began collecting rents directly from the subtenant without filing any foreclosure action.
Tyrone Tran and Thaddeus Tran held Blackacre as joint tenants with right of survivorship. Tyrone alone executed a mortgage on his interest to Terra Financial. Tyrone later died. Terra Financial claimed that the mortgage had severed the joint tenancy, leaving Thaddeus as a tenant in common with Tyrone's estate.
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Yes. The mortgagee already holds legal title from the execution of the mortgage, so default allows the mortgagee to exercise possessory rights and collect rents without first completing foreclosure proceedings.
Supporting sources
Yes. Because the mortgage transfers legal title, it destroys the unities of time and title and converts the tenancy into a tenancy in common.
Supporting sources
Under title theory the mortgagee may collect rents immediately upon default because it holds legal title. Under lien theory the mortgagor retains title and the right to rents until foreclosure is completed.
Supporting sources
…of land, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor. In a title theory state like Massachusetts, a mortgage is a transfer of legal title in a property to secure a debt. Therefore, when mortgage loans are pooled in a trust and converted into mortgage-backed…