California as a Lien Theory and Title Theory State

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State of California I. Title and Lien Theory Difference Between Two Theories The State of California has a mixed approach in that it is a lien theory and title theory state. According to lien theory "execution of a mortgage or a deed of trust only creates a lien against the property, it does not transfer title. The borrower retains full title to the property throughout the term of the loan and the lender simply has the right to foreclose the lien if the borrower defaults. California is a lien theory state in regards to mortgages but is a title theory state in regards to deeds of trust. According to title theory, the property is transferred but only as collateral with no possessory rights and is referred to as "legal title, bare title, or naked title." (Haupt, 2009, p.206) In either case, should the borrower default, they will lose the property. II. Advantages and Disadvantages of Title and Lien Theory According to the work of Haupt "Principles of California Real Estate "There are actually not many differences between lending and foreclosure procedures in title theory and lien theory states now; the distinction is more theoretical than practical. Under either theory, the borrower will lose the property if the loan is not repaid." (p.206) III. Difference Between FHA and VA Loans The VA Home Loan Guaranty Program is reported as having been conceived "as a part of the Servicemen's Readjustment Act of 1944. The VA Loan Guaranty Service is the organization within the VA

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