Finance
California is primarily a 'lien theory' or 'title theory' state for mortgages?
ATitle theory — lenders hold legal title through a mortgage
BLien theory — borrowers hold title, and the mortgage creates a lien on the property✓ Correct
CIntermediate theory — title passes to the lender only upon default
DNeither — California uses deed of trust exclusively, not mortgages
Explanation
California is a lien-theory state. When a deed of trust is used, equitable title remains with the borrower (trustor). While a trustee technically holds legal title, the arrangement functions like a lien, and borrowers retain possession and many ownership rights during the loan period.
Related California Finance Questions
- What is the difference between a first mortgage and a second mortgage?
- What is 'equity' in real estate?
- What is a 'USDA Rural Development loan' and who qualifies?
- What is 'mortgage insurance premium' (MIP) and when is it required?
- What is the conforming loan limit's primary purpose?
- What is a 'balloon payment' mortgage?
- Under California's anti-deficiency laws, which type of loan typically prevents a lender from suing a borrower for a deficiency after foreclosure?
- A borrower's debt-to-income (DTI) ratio is calculated by dividing:
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →