Liens vs Title States
Although everyone calls the loan to purchase a house a mortgage, it’s likely the loan is not a real mortgage. In the United States, there are lien theory states and title theory state. In title theory states, like Georgia, the loan is secured by an interest in the title to the property. In title states, the loan is secured by a Deed of Trust or a Security Deed. The lender has a title interest in the property, but the borrower still has the right to the use and enjoy of the property. In lien theory states, the lender simply has a lien on the property. The lender does file a mortgage in lien states.
The main difference between them is how the lender forecloses. In Georgia, a title state, the lender does not need to go through a judicial process to foreclose on the real estate. The lender sends out the required notices and publications, and auctions the property at the county courthouse the first Tuesday of the month. Title-theory states have the option of going through a judicial foreclosure, but it is not required in most circumstances. Each state has different foreclosure procedures.
In lien states that have mortgages, the lender must go through a judicial process before foreclosing. The judicial process normally costs more and takes longer to complete. The judicial process allows the owner an opportunity to present any legal defenses against the foreclosure. The judicial process also provides notice to any subordinate lenders that may lose their lien in the real estate.
John C. Bennett is a real estate closing attorney and owner of Origin Title and Escrow, Inc.. Since 2003, Origin Title has handled real estate transactions – purchases, refinances, reverse mortgages – quickly and professionally. There will be no surprises, nothing misunderstood. Title searches are thorough and well-reasoned, to avoid unpleasant surprises later down the road. Calculate your closing costs in Georgia or Florida using our calculator or contact Origin Title using this form.