Mortgage Law
In real property, mortgages are security interests held by the lender as the security for debt, typically in the form of a money loan. However, the mortgage of itself isn’t considered a debt, but the lender’s security for covering a debt. Thus, a transfer for land interest or an equivalent thereof between the mortgage owner to the lender of the mortgage based on conditions of interest being returned to the land owner upon satisfaction of the mortgage terms being performed. Therefore, the mortgage is the lenders security to cover the risk by the lender for approving the borrower.
The term mortgage originates from French law meaning “dead pledge”, and originally referred to just Welsh mortgages, but was later applied to all gages during the Middle Ages and folk etymology reinterpreted the term to refer to a pledge ending either once property is obtained by foreclosure or the obligation is satisfied.
In the majority of jurisdictions, mortgages are associated strongly with real estate loans that have been secured between a lender and borrower, instead of being on properties such as ships. However, there are jurisdictions where only land property can be mortgaged. Furthermore, mortgages are standardized methods of which businesses and individuals are able to buy real estate with no requirement of paying the entire value straight out from resources of their own.
When it comes to residential mortgage lending, an individual must apply for a mortgage loan. Whereas, for commercial properties the business must apply for a commercial mortgage.
Variant Terminology and Participants
Within various countries, the legal systems may have certain common concepts which employ various terminology. Although, mortgage of property generally consists of parties of the following: the borrower and lender. Lenders are known as mortgagee’s which receive a mortgage from the borrower, known as a mortgagor.
Lender/Mortgagee
Mortgage lenders are investors which approve money loans while securing real estate mortgages. In the current mortgage market, it is common for lenders to sell off loans written through the secondary mortgage market. Once the original lender sells off the mortgage, they earn a revenue referred to as Service Release Premiums. Usually, the purpose behind the approved loan is to provide the borrow the ability to use the money loan for purchasing the same real estate being mortgaged. Being the mortgagee, lenders have the legal right of selling the mortgaged property as a means of paying off an existing loan balance in the event the borrower of the loan is unable or fails to pay the loan back.
A mortgage cannot be alienated and is tied to the property; therefore, the mortgage follows the land in the event the borrower transfers the land or property to another party. If the borrower neglects to repay the original loan, the mortgagee maintains the right of selling the property to cover any unpaid balances.
Furthermore, mortgages are recorded or registered with government offices against the title to be public record with the intention of eliminating buyers from unknowingly purchasing a mortgaged property. One the balance of the loan has been repaid, it is the right of the borrow to request the mortgage be discharged on the title.
Borrower/Mortgagor
The borrower of a mortgage is referred to as the mortgagor. This is the individual which owes the lender with the responsibility and obligation of securing the mortgage on a loan. Usually, the lender will stipulate a set of conditions the borrower has to meet to redeem the mortgage. These conditions may be referred to as the underlying loan conditions, which the borrow is obligated to maintain.
If the borrower fails in following and/or meeting the conditions agreed on, the mortgagee has legal rights to foreclose on the property for the purpose of recovering any outstanding balance on the loan. Generally, the borrower within a mortgage is the individual landlord, homeowner, or business which is obtaining a loan for the purpose of purchasing the property.
Other Participants
Due to the legal exchange complications, or conveyance of property, a single or both key participants have the potential of requiring legal representations. Depending on the jurisdiction, the type of agent used in conveyancing can be different. For instance, within English speaking regions, agents may be a general legal practitioner, such as a solicitor or attorney. Meanwhile, in areas like South Africa which are influenced by English Law, a licensed conveyancer is used. However, in the United States, the most commonly used are real estate agents.
History
WA wadset was the only legal means of securing realty in Anglo-Saxon England during the period when interest loans were illegal. Wadset were loans which were masked by a land sale under the rights of reversion. Therefore, borrowers, known as reversers would be conveyed by a fee simple estate charter, with a loan being considered by the wadsetter (lender). The lender would reconvey an estate back to the reverser using a second charter upon redemption. However, challenges that existed with this arrangement method included the wadsetter being the property’s absolute owner, allowing it to sell the property to a third party, or refuse the reconveyance back to the original reverser. The reverser’s principal means for repayment were also stripped.
In future years, especially in Scotland the practice was used for executing individual back-bonds based on the reverser and right of the reverter.
Late Middle Ages
In England, by the 13th century, gages have been limited to a term in years, while being held to a forfeiture proviso which provided terms of the property title being forfeited upon nonpayment to the lender. For example, the term in years would automatically expand to a fee simple, referred to as shifting fees.
The simple gage method was invalid by the 14th century, whereas the solution had been to merge both the gage of years and wadset approaches together to form a single transaction of two instruments: (a) absolute conveyance of fees to the lender for set number of years. (b) a bond or indenture which recited upon repayment, land would be reinvested to the borrower.
“Mortgage”, Wex Legal Dictionary.