Final answer:
Lenders receive defeasible fee interests in mortgaged land in Title theory states. The borrower conveys legal title to the lender, which is defeasible upon repayment of the loan. This is different from Lien theory states, where the borrower retains the title and provides a lien to secure the loan.
Step-by-step explanation:
In which states do lenders receive defeasible fee interests in mortgaged land? The correct answer is B) Title theory states. In these states, when a mortgage is created, the borrower actually conveys legal title to the lender, subject to a defeasible right that will be defeated upon fulfillment of the condition to repay the loan.
On the other hand, in Lien theory states, the borrower retains the title and the lender is granted a lien on the property to secure the loan. As for Modified lien theory states, these are a hybrid between the two, where the mortgage may transfer the title to the lender but only for the purpose of foreclosure, and not during the period of repayment. Lastly, Trust theory states involve the use of a trustee who holds the title for the benefit of the lender.