Also known as: title theory mortgage · title theory
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage doctrine under which the mortgagee receives legal title to the property at the time the mortgage is executed. The mortgagor retains only an equity of redemption that permits reacquisition of full title by paying the debt. Default allows the mortgagee to exercise possessory rights and collect rents as incidents of that title without first completing foreclosure.
Torchlight Media borrowed from Threshold Capital and granted a mortgage on its office building. After missing payments, Torchlight continued to occupy the building and collect rents from its subtenant. Threshold appointed a receiver who began collecting those rents directly. Under the title theory the mortgage had already conveyed legal title to Threshold, so the receiver could redirect the income stream without waiting for foreclosure.
Talia Torres and Tobias Thomas held land as joint tenants with right of survivorship. Talia alone executed a mortgage to Titan Industries. When Talia later died, the mortgage had already transferred legal title to Titan under the title theory. The conveyance destroyed the unity of title, converting the tenancy into a tenancy in common and eliminating Tobias's right of survivorship.
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Under the title theory the mortgagee already holds legal title and may take possession and rents upon default. Under the lien theory the mortgagor keeps legal title and possession until foreclosure is completed.
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Yes. Because the mortgage conveys legal title to the mortgagee, it destroys the unities required for joint tenancy and converts the estate into a tenancy in common.
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The mortgagor retains only an equity of redemption that permits reacquisition of full title by paying the secured debt before foreclosure.
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…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…