Where this fits on the exam
| Official syllabus topic | Financing: Security Instruments; Mortgage Theory |
|---|---|
| Official PSI area | Financing |
| Published weight | 10% of the national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Lien theory | Title theory |
|---|---|---|
| Legal title during loan | Borrower generally retains legal title | Lender or security holder receives legal title for security |
| Lender's interest | Lien against the property | Title held for the debt-security purpose |
| Typical instrument clue | Mortgage in a lien-theory jurisdiction | Title-conveying security instrument |
| Georgia connection | Useful national contrast | Georgia security-deed structure fits the title-theory exam classification |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A Georgia borrower occupies the home while the security deed conveys legal title to the lender as collateral.
Reason it through. Possession and equitable rights can remain with the borrower even though legal title is held as security.
Answer. The facts match the title-theory exam classification.
Common exam traps
- Equating legal title with day-to-day possession
- Using the label instead of reading the instrument
- Calling every state pure lien or title theory without nuance
- Assuming lender title permits sale without contractual and statutory procedure
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A Georgia buyer finances a home with a deed to secure debt. While the loan is outstanding, who holds legal title?
- A. The buyer, while the lender holds only a lien
- B. The lender, as security for the debt
- C. The closing attorney, until the loan is paid
- D. The county, until the security deed is canceled
Show answer and explanation →
Answer: B. The lender, as security for the debt
A Georgia security deed conveys legal title to the lender as security, with a right to reconveyance when the debt is paid. That fits the title-theory classification. The first choice describes a lien-theory mortgage, which does not convey legal title as security.
- A. Incorrect. That describes the standard lien-theory mortgage framework. Georgia's deed to secure debt has a title-conveyance effect.
- B. Correct. The security deed conveys legal title as security to the lender, with the borrower's right to reconveyance upon payment.
- C. Incorrect. Conducting the closing does not vest the attorney with title for the loan term. The deed conveys security title to its grantee.
- D. Incorrect. Recording in county records does not convey ownership to the county. The county's recording role is separate.
Question 2Which statement about a Georgia borrower during the life of a security deed is correct?
- A. The borrower has no property rights until payoff
- B. The borrower must pay rent to the lender to occupy
- C. The borrower holds legal title and the lender a lien
- D. The borrower keeps possession and equitable rights
Show answer and explanation →
Answer: D. The borrower keeps possession and equitable rights
Although legal title is held as security, the borrower keeps possession and equitable rights in the property. Legal title for security is not the same as day-to-day ownership or control. Assuming the borrower has no rights confuses legal title with possession.
- A. Incorrect. The borrower retains equitable rights and ordinarily possession. A security conveyance does not eliminate all ownership interests.
- B. Incorrect. A security deed is not a landlord-tenant lease requiring rent to the lender. The borrower owes the note payments.
- C. Incorrect. This reverses the title effect of the Georgia security deed. Its grantee holds legal title for security.
- D. Correct. The borrower ordinarily remains in possession and retains equitable rights while the lender holds legal title as security.
Question 3In a lien-theory state, a borrower signs a mortgage to finance a home. What does the lender receive?
- A. A lien, while the borrower keeps legal title
- B. Legal title, while the borrower keeps possession
- C. Equitable title, while the borrower keeps a lien
- D. Full ownership until the loan is paid off
Show answer and explanation →
Answer: A. A lien, while the borrower keeps legal title
Under lien theory, the borrower keeps legal title and the lender holds a lien against the property. The second choice describes title theory, which is how Georgia's security deed works. Mixing up the two frameworks is exactly what this comparison tests.
- A. Correct. Under the stated lien-theory framework, the mortgage gives the lender a lien while legal title stays with the borrower.
- B. Incorrect. Conveying legal title to the security holder describes title theory, not the lien-theory mortgage in this stem.
- C. Incorrect. This swaps the parties' interests. The lender holds a lien, and the borrower retains legal title.
- D. Incorrect. A lien is a security interest, not complete ownership of the home. The borrower keeps title under this framework.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Fully Amortized Versus Balloon Versus Interest-Only Loan. Knowing who holds title under a Georgia security deed is half the picture; Fully Amortized Versus Balloon Versus Interest-Only Loan covers how the note's payments reduce, or fail to reduce, the debt that deed secures.
Return to the complete exam-concept library or the Financing hub.