non-possessory lien

Definition

A legal hold over a property/asset by an organization or financial institute to protect a loan given out in case of default or failure of borrower to pay that loan. For example, in the case of a mortgage, where a bank has the right to repossess the mortgagor's home upon payment default. Note that the property acting as a security is not in the physical possession of the issuing company; instead, its right over that property is recognized and protected by the law. Opposite of this is the possessory lien, in the case of artisans or pawn shops that have automatic right to sell borrower's item, which is in their possession upon failed payment.

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