Property Ownership
In South Carolina, a 'lien theory' state versus a 'title theory' state affects mortgages in that:
AIn both theories, the borrower holds legal title
BSC is a lien theory state where the mortgage creates only a lien; the borrower retains legal title. Some states are title theory states where the lender holds title✓ Correct
CThe borrower holds title in title theory states only
DBoth theories are identical in practice
Explanation
South Carolina is a lien theory state — a mortgage creates only a security interest (lien) on the property while the borrower retains legal title. In title theory states, the lender holds legal title during the loan.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
EncumbranceAny claim, lien, charge, or liability attached to real property that affects its value or limits its use.
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