Lien Theory
The rule, followed in Florida, that a borrower keeps title to mortgaged property while the lender holds only a lien.
Florida is a lien theory state. When a borrower takes out a mortgage, the borrower keeps both legal and equitable title to the property. The lender holds a lien against the property as security for the debt rather than holding title.
Because the lender holds only a lien, taking the property after default requires going through the courts. Florida uses judicial foreclosure.
On the exam
Exam trap
Tested in
Residential Mortgages (9% of the exam)
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- Mortgage
The security instrument that pledges real property as collateral for a debt, creating a lien in favor of the lender.
- Promissory Note
The borrower's written promise to repay a debt, which is the instrument that actually creates the obligation.
- PMI (Private Mortgage Insurance)
Insurance a conventional borrower pays when the loan-to-value ratio is above 80 percent, protecting the lender against default.
Sources
This definition is Florida real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.