Question

A lender lends money to a homeowner and takes legal title to the property as collateral during the payoff period. They are in a:_________a. Title theory stateb. Lien theory statec. State allowing land trustsd. State where hypothecation is illegal

Answer 1

A lender lends money to a homeowner and takes legal title to the property as collateral during the payoff period. They are in a: Title theory state

Explanation:

In title theory states, the borrower does not keep the right to the goods while the loan duration. The dealer gives the client/borrower a document to the goods but when the borrower acknowledges the contract for the loan the borrower gives the power back to the contract owner.

The donor then retains ownership to the property, as warranty only, until all loan refunds have been made. During that time the borrower has the power to hold of the property, and the donor delivers the document back to the borrower only after the loan commitment has been satisfied.

This theory is applicable during the taking a house for rent from the homeowner based on agreement.