Mortgage theories: title, lien, and intermediate - Next Generation Bar Exam

1. In a title-theory state, A and B are joint tenants. A mortgages her interest and then dies. What is B's interest?

   B holds a one-half interest as a tenant in common, because A's mortgage severed the joint tenancy. Under title theory, the mortgage transferred title and broke the unity of title.

2. Under the lien theory of mortgages, who holds legal title to mortgaged property before foreclosure?

   The mortgagor. The mortgagee holds only a lien securing the debt.

3. Under the title theory of mortgages, who holds legal title to mortgaged property until the debt is paid?

   The mortgagee. The mortgagee may take possession at any time absent a contrary agreement.

4. Under the intermediate theory of mortgages, when may the mortgagee take possession?

   On the mortgagor's default. Before default, the mortgagor retains title and possession.

5. What is the effect of the mortgage theory on whether a mortgage by one joint tenant severs the joint tenancy?

   A mortgage severs the joint tenancy under the title theory but not under the lien theory. Under title theory, the mortgage transfers legal title, breaking the unity of title.

6. Under the lien theory, what is the effect of a joint tenant mortgagor's death on the mortgage?

   The mortgage ends with the deceased joint tenant's interest, and the survivor takes free of it. This is the majority result in lien-theory jurisdictions.

7. Under the lien theory, what must a mortgagee do to obtain possession before foreclosure?

   Obtain the mortgagor's consent or abandonment, or the appointment of a receiver. The mortgagor retains the right of possession until foreclosure.

8. Which mortgage theory do most US jurisdictions follow?

   The lien theory. Title and intermediate theories are followed in a minority of states.

9. What is a mortgagee in possession's obligation regarding the property?

   To manage it reasonably and account for rents and profits. Rents collected are applied to the mortgage debt.

10. In a lien-theory state, a mortgagor defaults and the mortgagee seeks to collect rents from tenants before foreclosure. What must the mortgagee obtain?

    Possession by consent or a court-appointed receiver. The mortgagee has no right to possession or rents before foreclosure.

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