In what kind of state does a mortgage represent an actual transfer of ownership from borrower to lender?

In a title theory state, a mortgage actually represents a transfer of ownership from the borrower to the lender. In this context, when the borrower takes out a mortgage, they temporarily convey legal title of the property to the lender as security for the loan. This means that the lender holds ownership rights over the property until the borrower fulfills their obligations under the mortgage agreement, such as making timely loan payments.

In title theory states, the lender has more control and rights over the property, which can influence how foreclosure processes are handled. This differs from lien theory states, where the borrower retains ownership and the lender holds only a lien against the property until the mortgage is paid in full. This fundamental distinction highlights why a mortgage in a title theory state signifies an actual transfer of ownership rather than just a security interest.