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Lender/mortgagee
A mortgage lender is an investor that lends money secured by a mortgage on real estate.
In today's world, most lenders sell the loans they write on the secondary mortgage
market. When they sell the mortgage, they earn revenue called Service Release
Premium. Typically, the purpose of the loan is for the borrower to purchase that same
real estate. As the mortgagee, the lender has the right to sell the property to pay off the
loan if the borrower fails to pay.
The mortgage runs with the land, so even if the borrower transfers the property to
someone else, the mortgagee still has the right to sell it if the borrower fails to pay off
the loan.
So that a buyer cannot unwittingly buy property subject to a mortgage, mortgages are
registered or recorded against the title with a government office, as a public record. The
borrower has the right to have the mortgage discharged from the title once the debt is
paid.
Borrower/mortgagor
Other participants
Because of the complicated legal exchange, or conveyance, of the property, one or both
of the main participants are likely to require legal representation. The agent used for
conveyancing varies based on the jurisdiction. In the English-speaking world this means
either a general legal practitioner, i.e., an attorney or solicitor, or in jurisdictions
influenced by English law, including South Africa, a (licensed) conveyancer. In the
United States, real estate agents are the most common. In civil law jurisdictions
conveyancing is handled by civil law notaries.
Because of the complex nature of many markets the borrower may approach a mortgage
broker or financial adviser to help him or her source an appropriate lender, typically by
finding the most competitive loan.
The debt instrument is, in civil law jurisdictions, referred to by some form of Latin
hypotheca (e.g., Sp hipoteca, Fr hypothque, Germ Hypothek), and the parties are
known as hypothecator (borrower) and hypothecatee (lender). A civil-law hypotheca is
exactly equivalent to an English mortgage by legal charge or American lien-theory
mortgage.
History
Anglo-Saxon and Anglo-Norman law
In Anglo-Saxon England, when interest loans were illegal, the main method of securing
realty was by wadset (ME wedset).[2] A wadset was a loan masked as a sale of land
under right of reversion. The borrower (reverser) conveyed by charter a fee simple
estate, in consideration of a loan, to the lender (wadsetter) who on redemption would
reconvey the estate to the reverser by a second charter. The difficulty with this
arrangement was that the wadsetter was absolute owner of the property and could sell it
to a third party or refuse to reconvey it to the reverser, who was also stripped of his
principal means of repayment and therefore in a weak position. In later years the
practiceespecially in Scotland and on the continentwas to execute together the
wadset and a separate back-bond according the reverser an in personam right of
reverter.
An alternative practice imported from Norman law was the usufructory pledge of real
property known as a gage of land. Under a gage the borrower (gagor) conveyed
possession but not ownership to the lender (gagee) for an unlimited term until
redemption. The gage came in two forms:
the living gage (Norman vif gage, Welsh prid), whereby the estates accruing
rents, profits, and crops went toward reducing the debt (that is, the debt was selfredeeming);
the dead gage (Norman mort gage, Scots deid wad), whereby the rents and
profits were taken in lieu of interest but did not reduce the debt.[3]
The gage was unattractive for lenders because the gagor could easily eject the gagee
using novel disseisin, and the gageemerely seized ut de vadio as of gagecould
not bring a freeholders remedies to recover possession.[4] Thus, the unprofitable living
gage fell out of use, but the dead gage continued as the Welsh mortgage until abolished
in 1922.
Legal aspects
Mortgages may be legal or equitable. Furthermore, a mortgage may take one of a
number of different legal structures, the availability of which will depend on the
jurisdiction under which the mortgage is made. Common law jurisdictions have evolved
two main forms of mortgage: the mortgage by demise and the mortgage by legal charge.
Mortgage by demise
In a mortgage by demise, the mortgagee (the lender) becomes the owner of the
mortgaged property until the loan is repaid or other mortgage obligation fulfilled in full,
a process known as "redemption". This kind of mortgage takes the form of a
conveyance of the property to the creditor, with a condition that the property will be
returned on redemption.
Mortgages by demise were the original form of mortgage, and continue to be used in
many jurisdictions, and in a small minority of states in the United States. Many other
common law jurisdictions have either abolished or minimised the use of the mortgage
by demise. For example, in England and Wales this type of mortgage is no longer
available in relation to registered interests in land, by virtue of section 23 of the Land
Registration Act 2002 (though it continues to be available for unregistered interests).
Equitable mortgage
Equitable mortgages don't fit the criteria for a legal mortgage, but are considered
mortgages under equity (in the interests of justice) because money was lent and security
was promised. This could arise because of procedural or paperwork issues. Based on
this definition, there are numerous situations which could lead to an equitable mortgage.
[13]
As of 1961, English law required the consent of the court before the equitable
mortgagee was allowed to sell.[14] When the borrower deposits a title deed with the
lender, it has historically created an equitable mortgage in England, but the creation of
an equitable mortgage by such a process has been less certain in the United States.[15]
In an equitable mortgage the lender is secured by taking possession of all the original
title documents of the property and by borrower's signing a Memorandum of Deposit of
Title Deed (MODTD). This document is an undertaking by the borrower that he/she has
deposited the title documents with the bank with his own wish and will, in order to
secure the financing obtained from the bank.[citation needed] Certain transactions are recognized
therefore as mortgages by equity, which are not so recognized by common law.
much faster for a deed of trust than for a mortgage, on the order of 3 months rather than
a year. Because the foreclosure does not require actions by the court the transaction
costs can be quite a bit less.[
The deed of trust
The deed of trust is a conveyance of title made by the borrower to a trustee (not the
lender) for the purposes of securing a debt. In lien-theory states, it is reinterpreted as
merely imposing a lien on the title and not a title transfer, regardless of its terms. It
differs from a mortgage in that, in many states, it can be foreclosed by a nonjudicial sale
held by the trustee through a power of sale.[19] It is also possible to foreclose them
through a judicial proceeding.
Deeds of trust to secure repayments of debts should not be confused with trust
instruments that are sometimes called deeds of trust but that are used to create trusts for
other purposes, such as estate planning. Though there are superficial similarities in the
form, many states hold deeds of trust to secure repayment of debts do not create true
trust arrangements.
Security deed
The so-called deed to secure debt is a security instrument used in the state of Georgia.
Unlike a mortgage, a security deed is an actual conveyance of real property - without
equity of redemption - in security of a debt. Upon the execution of such a deed, title
passes to the grantee or beneficiary (usually lender), however the grantor (borrower)
maintains equitable title to use and enjoy the conveyed land subject to compliance with
debt obligations.
Security deeds must be recorded in the county where the land is located. Although there
is no specific time within which such deeds must be filed, the failure to timely record
the deed to secure debt may affect priority and therefore the ability to enforce the debt
against the subject property.[20]
mortgage lien. Those attaching afterward are said to be junior or subordinate.[25] The
purpose of this priority is to establish the order in which lienholders are entitled to
foreclose their liens in order to recover their debts. If a property's title has multiple
mortgage liens and the loan secured by a first mortgage is paid off, the second mortgage
lien will move up in priority and become the new first mortgage lien on the title.
Documenting this new priority arrangement will require the release of the mortgage
securing the paid-off loan.
Assignment
Mortgages, along with the Mortgage note, may be assigned to other parties. Some
jurisdictions hold that the assignment of the note implies the assignment of the
mortgage, while others contend it only creates an equitable right.
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