In a lien theory state such as New York, the property buyer/mortgagor continues to hold the deed to the property until the loan is satisfied, or fully paid back to the lender!
At that time, a Satisfaction of Mortgage should be recorded.
This scenario differs from title theory states in which a Deed of Trust is issued naming the lender as the beneficiary of that trust until the mortgage is fully paid off. At that time, a Deed of Reconveyance is recorded. The Deed of Trust is held by a third party trustee.
Lien theory state versus title theory state also brings the different types of foreclosures into play should the borrower not pay the mortgage…They are the Judicial Foreclosure (lien theory state) vs Non-Judicial Foreclosure (title theory state) and the time frames and work required for the foreclosure process to conclude are quite different.
During the financial crisis judicial foreclosures could take 4-years or more, while in non-judicial states the process would go much faster.
This video was created by the firm Proplogix and it provides a great explanation of the lien versus title theory state question…