A legal claim against a property as security for a debt, such as a mortgage or unpaid taxes.
Why Lien matters on the exam
This term belongs to Property Ownership. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Lien
Every Freehold question shows why the right answer is right — and cites its source.
A promissory note is best classified as a negotiable instrument because it:
Must be recorded with the county before it becomes a legally valid instrument
Creates a lien against the real property described in the accompanying security instrument
Can be freely transferred or endorsed to another party who may then enforce payment
Requires the signatures of at least two witnesses before it becomes enforceable in court
Show answer & explanation
Can be freely transferred or endorsed to another party who may then enforce payment — Negotiability means the note can be transferred by endorsement or delivery, allowing a holder in due course to collect payment; the mortgage or deed of trust, not the note, creates the lien.
Source: PSI National Real Estate Exam Content Outline §4 Financing
In a lien theory state, execution of a mortgage gives the lender:
Legal title to the property until the loan is paid
The right to immediate possession
An equitable easement over the property
A lien against the property while the borrower retains title
Show answer & explanation
A lien against the property while the borrower retains title — Lien theory states treat a mortgage as creating only a lien on the property, with the borrower retaining both legal and equitable title until default and foreclosure occur.
Source: PSI National Real Estate Exam Content Outline §4 Financing
Which best describes the theory of mortgages followed in a title theory state?
The lender is considered to hold legal title as security until the debt is repaid
The borrower holds legal title, the lender holds only a lien
Neither party holds title until foreclosure
The trustee is not involved in the transaction
Show answer & explanation
The lender is considered to hold legal title as security until the debt is repaid — Title theory states treat the mortgage as transferring legal title to the lender as security, with the borrower retaining equitable title and the right of possession during repayment.
Source: PSI National Real Estate Exam Content Outline §4 Financing
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