In a lien-theory state:

In a lien-theory state, the key principle is that the borrower (mortgagor) retains legal title of the property while the lender (mortgagee) holds a lien against it. This means that although the lender has an interest in the property by virtue of the loan, ownership remains with the borrower as long as they meet the terms of the mortgage. The lien serves as a security interest for the lender, ensuring that they have the right to be paid if the borrower defaults, but it does not transfer ownership of the property.

Understanding this framework helps clarify the functioning of liens in real estate transactions within lien-theory states. With retention of title, the borrower has the ability to manage and control the property, including selling it or encumbering it further, subject to the existing lien. This setup contrasts with title-theory states, where the lender would hold the title until the mortgage is paid off.

In this context, the other options do not accurately represent the characteristics of a lien-theory state. The concept of recording liens in trusts or strict foreclosure does not apply to the lien-theory principle, nor does the idea of trustees retaining title during the mortgage period, which aligns more closely with title-theory states. Understanding these