In a Title State, the lender holds title to the property in the name of the borrower through a Deed of Trust. When the loan is completely paid off, the lender issues and records a Deed of Reconveyance in favor of the borrower who then has clear title to the property.

These are the title theory states:

• Alabama*
• Alaska.
• Arizona.
• California.
• Colorado.
• Washington D.C.
• Georgia.
• Idaho.

In title theory states, banks or mortgage lenders hold the title of a property until it is paid in full. In lien theory states, however, banks or mortgage lenders never retain title to the property.

What is lien theory? In lien theory states, the borrower holds the title to the property. Instead of a Deed of Trust, a Mortgage is recorded in the public record and acts as a lien against the property until the debt is paid off. With a mortgage, a homeowner has both legal and equitable title.

Florida, along with slightly fewer than half of the United States, is a “lien theory” state. This means that a homeowner in Florida actually owns the home, regardless of whether or not he or she is still paying down a mortgage.

It is settled law that California is a “lien” and not a “legal title” theory state when imposing encumbrances/liens against the title of real property. California has a 150-year history of development and evolution in the way its courts have applied legal principles to mortgages and deeds of trust.

The requirements for a valid deed are a grantor, a grantee, a writing and subscription, delivery, and acceptance. Thus, an unrecorded deed is valid as between the parties and as to all those who have notice thereof. (Cal.

Visit the California Free Public Records Directory website (see References), or the town or county clerk’s office. If you’re on the website, you can search records by county, town, zip code and category. In the office, you’ll need the property address or the owner’s name.

A first lien is the first to be paid when a borrower defaults and the property or asset was used as collateral for the debt. A first lien is paid before all other liens. A bank that holds the first mortgage on a property has the first lien.

A general rule in property law says that whichever lien is recorded first in the land records has higher priority over later-recorded liens. This rule is known as the “first in time, first in right” rule.

First lien debt holders are paid back before all other debt holders, including other senior debt holders. A lien is the legal right of a creditor to seize property from a borrower that has failed to repay the creditor. The creditor may exercise the lien by selling the property if the loan is not paid back.

Second-lien debt is borrowing that occurs after a first lien is already in place. It subsequently refers to the ranking of the debt in the event of a bankruptcy and liquidation as coming after first-lien debt is fully repaid. Another term for this type of debt security is junior or subordinated debt.

First Lien Pledge Agreement means that certain Pledge and Security Agreement dated as of November 30, 2005, granting a first priority security interest in substantially all of the personal property assets of the Loan Parties, by each Loan Party in favor of the First Lien Administrative Agent for the benefit of the …

Pledge is used to create a charge over movable properties whereas Mortgage is used in case of immovable properties. In case of pledge, the goods are kept with the lender, whereas mortgaged properties are retained with the borrower.

As nouns the difference between pledge and collateral is that pledge is a solemn promise to do something while collateral is a security or guarantee (usually an asset) pledged for the repayment of a loan if one cannot procure enough funds to repay (originally supplied as “accompanying” security).

To accurately ascertain whether the business qualifies for the loan, banks generally refer to the six “C’s” of lending: character, capacity, capital, collateral, conditions and credit score.

A pledged asset is a valuable possession that is transferred to a lender to secure a debt or loan. A pledged asset is collateral held by a lender in return for lending funds. Pledged assets can reduce the down payment that is typically required for a loan as well as reduces the interest rate charged.