Title Theory Definition

A property-law doctrine that a mortgage transfers title to a property to the mortgagee, who holds it until the mortgage has been paid off, at which time title passes to the mortgagor. Only a few American states have adopted this theory, and they are known as title states or title theory jurisdictions. Compare lien theory, applicable in most jurisdictions, which provides that a mortgagee of property holds only a lien, not title, to the property until such time as the mortgage is fully paid, at which time the lien is removed.