In which theoretical state does the borrower hold title to the property while the lender has a lien?

In a lien theory state, the borrower holds legal title to the property, while the lender holds a lien against it as security for the loan. This means that the borrower has the right to occupy and use the property even though the loan has not been fully repaid. The lender's lien is essentially a claim against the property that allows them to take possession in the event of default.

This framework creates a relationship where the lender does not hold title but instead secures their interest through the lien. This stands in contrast to title theory states, where the lender actually holds the title until the loan is paid off, and the borrower has only equitable rights to the property. Understanding this distinction helps clarify the rights and responsibilities of both borrowers and lenders in different legal contexts.