What happens to legal title in a title theory arrangement once the debt is paid in full?

In a title theory arrangement, when the debt is paid in full, the legal title is transferred back to the borrower. This system operates under the principle that the lender holds the title to the property as security for the debt. Once the borrower has fulfilled the obligations of the loan and repaid the debt in full, the lender’s security interest in the property ceases.

This returning of title occurs through a formal process, often involving the execution of a deed that conveys ownership back to the borrower. It underscores the concept that the borrower, having satisfied the terms of the loan agreement, regains full ownership rights to the property.

This aspect of title theory highlights the borrower’s eventual return to full ownership after the debt obligation is complete, reinforcing the principle of ownership rights.