Aceable Agent – Finance Practice Test

In a title theory state, who holds title to the property while the loan is outstanding?

Lender Borrower Government Trustee

Correct Answer:

Borrower

Explanation:

In a title theory state, the lender holds the legal title to the property while the loan is outstanding. The borrower retains equitable title and possession, but the recorded ownership sits with the lender (or with a trustee if a deed of trust is used). This arrangement gives the lender stronger rights to control or foreclose if the borrower defaults, and the title is returned to the borrower only after the loan is fully paid. In lien theory states, the borrower would keep title and the lender would have a lien instead.

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