Title Theory Law and Legal Definition

Title theory is a doctrine of property law that a mortgage transfers legal title of the property to the mortgagee, who holds it until the mortgage has been satisfied . Only a few American states have adopted this theory, and they are known as title states or title theory jurisdictions.

California has adopted the "lien" theory of mortgages, and the "title" theory in reference to deeds of trust, and while in a mortgage only a lien is created, in a deed of trust title actually passes to the trustee. [Bank of Italy Nat. Trust & Sav. Assn. v. Bentley, 217 Cal. 644, 647 (Cal. 1933)]