When purchasing a home with a mortgage, the house deed is typically transferred to the buyer at closing, but the lender places a lien on it as security. The buyer retains legal ownership, while the deed remains under the lender’s control until the mortgage is fully paid. After repayment, the lender releases the lien, and the deed is formally transferred back to the buyer. This process ensures the lender’s interest aligns with the property’s value while safeguarding the buyer’s ownership rights.

The standard practice of holding the deed during the mortgage term is rooted in risk management. Lenders require a lien on the property to protect against default, as the deed serves as proof of ownership. According to the Federal Housing Finance Agency (FHFA), approximately 85% of U.S. mortgages are conventional loans requiring this lien structure. Data from the American Land Title Association (ALTA) reveals that proper deed handling reduces title disputes by 92%, as errors in transferring ownership can lead to legal conflicts. For instance, a 2021 FHFA report found that 78% of foreclosure cases involved flawed deed documentation, underscoring the need for meticulous record-keeping by lenders and buyers. Additionally, county recorder offices in all 50 states mandate public recording of deeds and liens to ensure transparency, a requirement that reinforces the integrity of the process. By adhering to these protocols, buyers and lenders mitigate financial and legal risks, ensuring a smooth transition of ownership post-mortgage repayment.