Mortgage
Since the 20th century, the mortgage was devised as a way to allow most people to buy property. Prior to 1900, property owners were understood to own their real property outright.
Terminology[edit | edit source]
- mortgage = a lien on real property = for simplicity, the mortgage is equated with the debt
- Mortgagor = borrower = debtor
- Mortgagee = lender
- Equity = Borrower's interest in the property
Types of mortgages[edit | edit source]
- Traditional mortgage = mortgage + promissory note
- Deed of trust = mortgagor (borrower) conveys the property in trust to a trustee (3rd party); the trustee may sell the property for the benefit of the lender if the borrower defaults
- Equitable mortgage = conveyance of property by deed from the borrower to the lender; courts will treat the transaction as a mortgage
Acceleration Clause[edit | edit source]
The acceleration clause in a mortgage contract is a provision that the entire balance of the loan would become due immediately upon default.
Redemption of foreclosed property[edit | edit source]
The mortgagor (borrower) may reclaim (redeem) the property in 2 different ways:
1. equity of redemption = redeem the property before the foreclosure proceedings are terminated; at this stage, the property is auctioned off to the highest bidder.
2. statutory right of redemption = after the foreclosure proceedings are terminated. The statutory right of redemption involves a payment to the buyer, not a payment to the mortgagee (lender).
