What occurs during hypothecation in a loan closing?

During hypothecation in a loan closing, the property is used as collateral for the loan without the borrower having to give up possession or use of the property. This means that the borrower retains the rights to occupy and use the property while the lender holds a security interest in it. Hypothecation allows borrowers to leverage their property for financing purposes, accessing funds while maintaining their ownership and rights to utilize the property.

This process is particularly important in real estate transactions, as it facilitates the ability of buyers to secure loans without having to relinquish their home or investment. The lender is provided with the assurance that the property can be claimed should the borrower default on the loan, creating a balance between the interests of both parties.

In the context of the other options, they focus on specific actions related to the assignment of mortgages or the transfer of title, which do not capture the essence of hypothecation, where the emphasis is on maintaining use and possession of the property while securing financing.