Under title theory, what happens upon full payment of the mortgage debt?

In title theory, when a borrower fully pays off the mortgage debt, the borrower assumes complete ownership of the property. This approach differs significantly from lien theory, where the borrower holds title while the lender has a lien against the property. In title theory states, the lender initially holds the title to the property, and once the borrower fulfills their obligation by repaying the mortgage, the lender transfers the title back to the borrower. This transfer signifies that the borrower is now the full and sole owner, free from the lender's claim. The completion of payment thus effectively restores the borrower's rights over the property.

The other options do not accurately describe the outcome upon full payment in title theory, as the lender does not retain ownership, the property is not sold to a third party, nor is there a renewal of the mortgage involved.