If a region is occupied/annexed by foreign troops, they would still be considered loyal to their original realm, not sympathetic. For example, if Linlithgow was annexed by the English during one of the many, many wars between England and Scotland, with knights and men-at-arms patrolling the streets and manning the walls, the populace could still very well be loyal to the Kingdom of Scotland. I doubt anyone would call it "sympathy".
That's simply because the region, as we'd term it in BattleMaster, would be Scottish but ruled by England.
Now, if a village/town on the English side of the "traditional" border was more pro-Scottish, but its people and culture English, then that'd be "sympathy" rather than "loyalty".
All in all, a matter of semantics. I do like that the game does keep track of that sort of thing to some degree though. Just wish it was a little more presistant and took "cultures" into account.
