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Encyclopedia > Mortgage
Property law
Part of the common law series
Acquisition of property
Gift  · Adverse possession  · Deed
Lost, mislaid, and abandoned property
Alienation  · Bailment  · License
Estates in land
Allodial title  · Fee simple  · Fee tail
Life estate  · Defeasible estate
Future interest  · Concurrent estate
Leasehold estate  · Condominiums
Conveyancing of interests in land
Bona fide purchaser  · Torrens title
Estoppel by deed  · Quitclaim deed
Mortgage  · Equitable conversion
Action to quiet title
Limiting control over future use
Restraint on alienation
Rule against perpetuities
Rule in Shelley's Case
Doctrine of worthier title
Nonpossessory interest in land
Easement  · Profit
Covenant running with the land
Equitable servitude
Related topics
Fixtures  · Waste  · Partition
Riparian water rights
Lateral and subjacent support
Assignment  · Nemo dat
Other areas of the common law
Contract law  · Tort law
Wills and trusts
Criminal Law  · Evidence

A mortgage is a method of using property (real or personal) as security for the payment of a debt. A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). ... Image File history File links This is a lossless scalable vector image. ... This article or section does not cite any references or sources. ... This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ... A gift, in the law of property, has a very specific meaning. ... In common law, adverse possession is the name given to the process by which title to anothers real property is acquired without compensation, by, as the name suggests, holding the property in a manner that conflicts with the true owners rights for a specified period of time. ... An English deed written on fine parchment or vellum with seal tag dated 1638. ... {{PropertyLaw}} In the [[common law]] of [[property]], personal belongings that have left the possession of their rightful owners without having directly entered the possession of another person are deemed to be lost, mislaid, or abandoned, depending on the circumstances under which they were found by the next party to come... Alienation, in property law, is the capacity for a piece of property or a property right to be sold or otherwise transferred from one party to another. ... Bailment describes a legal relationship where physical possession of personal property (chattels) is transferred from one person (the bailor) to another person (the bailee) who subsequently holds possession of the property. ... To licence or grant licence is to give permission. ... Estate is a term used in the common law. ... Allodial title is a concept in some systems of property law. ... Fee simple, also known as fee simple absolute or allodial, is a term of art in common law. ... This article includes a list of works cited or a list of external links, but its sources remain unclear because it lacks in-text citations. ... A life estate, is a term used in common law to describe the ownership of land for the duration of a persons life. ... A defeasible estate is created when a grantor transfers land conditionally. ... In property law and real estate, a future interest - is an interest that accompanies a defeasible estate. ... A concurrent estate or co-tenancy is a concept in property law, particularly derived from the common law of real property, which describes the various ways in which property can be owned by more than one person at a given time. ... A leasehold estate is an ownership interest in land in which a lessee or a tenant holds real property by some form of title from a lessor or landlord. ... This article refers to a form of housing. ... Conveyancing is the act of transferring the legal title in a property from one person to another. ... A bona fide purchaser (BFP)—or bona fide purchaser for value without notice (BFPFVWN)—in the law of real property, is an innocent party who purchases property for value, without notice of any other partys claim to the title of that property. ... Torrens title is a system of land title where a register of land holdings maintained by the state guarantees indefeasible title to those included in the register. ... Estoppel by deed is a doctrine in the law of real property that arises where a party conveys title to land that he does not own to a bona fide purchaser, and then acquires title to that land. ... A quitclaim deed is a term used in property law to describe a document by which a person (the grantor) disclaims any interest the grantor might have in a piece of real property, and passes that claim to another person (the grantee). ... Equitable conversion is a doctrine of the law of real property under which a purchaser of real property becomes the equitable owner of title to the property at the time he/she signs a contract binding him/her to purchase the land at a later date. ... This page is a candidate to be copied to Wiktionary. ... In property law and real estate, a future interest - is an interest that accompanies a defeasible estate. ... A restraint on alienation, in the law of real property, is a clause used in the conveyance of real property that seeks to prohibit the recipient from selling or otherwise transferring his interest in the property. ... The rule against perpetuities is a rule in property law which prohibits a contingent grant or will from vesting outside a certain period of time. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... In the common law of England, the doctrine of worthier title was a legal doctrine that preferred taking title to real estate by descent over taking title by devise or by purchase. ... A nonpossessory interest in land is a term of the law of property to describe any of a category of rights held by one person to use land that is in the possession of another. ... An easement is the right to do something or the right to prevent something over the real property of another. ... A profit, in the law of real estate, is a nonpossessory interest in land similar to the better-known easement, which gives the holder the right to take natural resources such as petroleum, minerals, timber, and wild game from the land of another. ... A covenant running with the land, is a real covenant, in the law of real property. ... An equitable servitude is a term used in the law of real property to describe a nonpossessory interest in land that operates much like a covenant running with the land, requiring the landowner to maintain certain practices with respect to the land (e. ... In the law of real property, fixtures are anything that would otherwise be a chattel that have, by reason of incorporation or affixation, become permanently attached to the real property. ... Waste is a term used in the law of real property to describe a cause of action that can be brought in court to address a change in condition of real property brought about by a current tenant that damages or destroys the value of that property. ... A partition is a term used in the law of real property to describe the court-ordered division of a concurrent estate into separate portions representing the proportionate interests of the tenants. ... Riparian water rights (or simply riparian rights) is a system of allocating water among those who possess land about its source. ... Lateral and subjacent support, in the law of property, describes the right a landowner has to have that land physically supported in its natural state by both adjoining land and underground structures. ... An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. ... Nemo dat quod non habet, literally meaning no one [can] give what they dont have is a legal rule, sometimes called the nemo dat rule that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title. ... A contract is any promise or set of promises made by one party to another for the breach of which the law provides a remedy. ... In the common law, a tort is a civil wrong for which the law provides a remedy. ... In the common law, a will or testament is a document by which a person (the testator) regulates the rights of others over his property or family after death. ... The law of trusts and estates is generally considered the body of law which governs the management of personal affairs and the disposition of property of an individual in anticipation and the event of such persons incapacity or death, also known as the law of successions in civil law. ... The term criminal law, sometimes called penal law, refers to any of various bodies of rules in different jurisdictions whose common characteristic is the potential for unique and often severe impositions as punishment for failure to comply. ... The law of evidence governs the use of testimony (e. ... This article or section does not cite any references or sources. ... For security (collateral), the legal right given to a creditor by a borrower, see security interest A security is a fungible, negotiable instrument representing financial value. ... For other uses, see Debt (disambiguation). ...


The term mortgage (from Law French, lit. dead pledge) refers to the legal device used for this purpose, but it is also commonly used to refer to the debt secured by the mortgage, the mortgage loan. This article does not cite any references or sources. ... A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). ...


In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property (such as ships) and in some cases only land may be mortgaged. Arranging a mortgage is seen as the standard method by which individuals and businesses can purchase residential and commercial real estate without the need to pay the full value immediately. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. ... A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). ... A commercial mortgage is a loan made using real estate as collateral to secure repayment. ...


In many countries it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom and the United States. An owner-occupier is a person who lives in a house that he or she owns. ...

Contents

Participants and variant terminology

Legal systems tend to share certain concepts but vary in the terminology and jargon used.


In general terms the main participants in a mortgage are:


Creditor

The creditor has legal rights to the debt or other obligation secured by the mortgage. That debt is often the obligation to repay the loan by the creditor (or its predecessor lender) who provided the purchase money to acquire the property mortgaged. Typically, creditors are banks, insurers or other financial institutions who make loans available for the purpose of real estate purchase. A creditor is a party (e. ... For other uses, see Bank (disambiguation). ... Insurance is the business of providing protection against financial aspects of risk, such as those to property, life, health and legal liability. ...


A creditor is sometimes referred to as the mortgagee or lender.


Debtor

The debtor is the person or entity who owes the obligation secured by the mortgage, and may be multiple parties. Generally, the debtor must meet the conditions of the underlying loan or other obligation and the conditions of the mortgage. Otherwise, the debtor usually runs the risk of foreclosure of the mortgage by the creditor to recover the debt. Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by way of a loan. In economics a debtor (or a borrower) owes money to a creditor. ... Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


A debtor is sometimes referred to as the mortgagor, borrower, or obligor.


Other participants

Due to the complicated legal exchange, or conveyance, of the property, one or both of the main participants are likely to require legal representation. The terminology varies with legal jurisdiction; see lawyer, solicitor and conveyancer. Conveyancing is the act of transferring the ownership of a property from one person to another. ... For the fish called lawyer, see Burbot. ... A solicitor is a type of lawyer in many common law jurisdictions, such as the United Kingdom, Hong Kong, Republic of Ireland, Australia, New Zealand and Canada, and in a few regions of the United States. ... A lawyer who deals with the legal aspect of buying and selling real property. ...


Because of the complex nature of many markets the debtor may approach a mortgage broker or financial adviser to help them source an appropriate creditor, typically by finding the most competitive loan. A mortgage broker acts as an intermediary who sources mortgage loans on behalf of individuals or businesses. ... A financial adviser is a professional who renders investment advice and financial planning services to individuals and businesses. ...


The debt is, in civil law jurisdictions, referred to as hypothecation, which may make use of the services of a hypothecary to assist in the hypothecation. For other uses of civil law, see civil law. ... Hypothecation is a pledge of property as security for a debt without transfer of possession. ...


Legal aspects

There are essentially two types of legal mortgage.


Mortgage by demise

In a mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is repaid in full (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.


This is an older form of legal mortgage and is less common than a mortgage by legal charge. In the UK, this type of mortgage is no longer available, by virtue of the Land Registration Act 2002. The Land Registration Act 2002 is an Act (i. ...


Mortgage by legal charge

In a mortgage by legal charge, the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it.


To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that there are no mortgages already registered on the debtor's property which might have higher priority. Tax liens, in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent the lienholder from foreclosing and wiping out the mortgage. For other uses, see Bank (disambiguation). ... A tax lien is a lien imposed on property by law to secure payment of taxes. ... Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


This type of mortgage is common in the United States and, since 1925, it has been the usual form of mortgage in England and Wales (it is now the only form - see above).


In Scotland, the mortgage by legal charge is also known as standard security. This article is about the country. ...


In Pakistan, the mortgage by legal charge is most common way used by Banks to secure the financing. It is also known as Registered Mortgage. After registeration of legal charge, Bank's Lien is recorded in land register stating that the property is under mortgage and can not be sold without obtaining NOC (No Objection Certificate) from the Bank.


Equitable Mortgage


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.

A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation (usually but not always the payment of a debt) which gives the beneficiary of the security interest certain preferential rights in relation to the assets. ...

History

At common law, a mortgage was a conveyance of land that on its face was absolute and conveyed a fee simple estate, but which was in fact conditional, and would be of no effect if certain conditions were not met --- usually, but not necessarily, the repayment of a debt to the original landowner. Hence the word "mortgage," Law French for "dead pledge;" that is, it was absolute in form, and unlike a "live gage", was not conditionally dependent on its repayment solely from raising and selling crops or livestock, or of simply giving the fruits of crops and livestock coming from the land that was mortgaged. The mortgage debt remained in effect whether or not the land could successfully produce enough income to repay the debt. In theory, a mortgage required no further steps to be taken by the creditor, such as acceptance of crops and livestock, for repayment. This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ... Fee simple, also known as fee simple absolute or allodial, is a term of art in common law. ... An Estate comprises the houses and outbuildings and supporting farmland and woods that surround the gardens and grounds of a very large property, such as a country house or mansion. ...


The difficulty with this arrangement was that the lender was absolute owner of the property and could sell it, or refuse to reconvey it to the borrower, who was in a weak position. Increasingly the courts of equity began to protect the borrower's interests, so that a borrower came to have an absolute right to insist on reconveyance on redemption. This right of the borrower is known as the "equity of redemption". The Court of Chancery, London, early 19th century This article is about the concept of equity in the jurisprudence of common law countries. ... The equity of redemption refers to the right of a mortgagor in law to redeem his property once the liability secured by the mortgage has been discharged. ...


This arrangement, whereby the mortgagee (the lender) was on theory the absolute owner, but in practice had few of the practical rights of ownership, was seen in many jurisdictions as being awkwardly artificial. By statute the common law position was altered so that the mortgagor would retain ownership, but the mortgagee's rights, such as foreclosure, the power of sale and the right to take possession would be protected. Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


In the United States, those states that have reformed the nature of mortgages in this way are known as lien states. A similar effect was achieved in England and Wales by the Law of Property Act 1925, which abolished mortgages by the conveyance of a fee simple. In law, lien is the broadest term for any sort of charge or encumbrance against an item of property that secures the payment of a debt or performance of some other obligation. ...


Foreclosure and non-recourse lending

In most jurisdictions, a lender may foreclose on the mortgaged property if certain conditions—principally, non-payment of the mortgage loan—apply. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


In some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt, through a deficiency judgment. It has been suggested that Non-recourse debt be merged into this article or section. ... Deficiency judgment (also spelled Deficiency judgement) is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficent funds to pay the mortgage in full. ...


Specific procedures for foreclosure and sale of the mortgaged property almost always apply, and may be tightly regulated by the relevant government. In some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries, the ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower.


Mortgages in the United States

Types of Mortgage Instruments

Two types of mortgage instruments are used in the United States: the mortgage (sometimes called a mortgage deed) and the deed of trust.[citation needed]


The mortgage

In all but a few states, a mortgage creates a lien on the title to the mortgaged property. Foreclosure of that lien almost always requires a judicial proceeding declaring the debt to be due and in default and ordering a sale of the property to pay the debt.[citation needed] Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


The deed of trust

The deed of trust is a deed by the borrower to a trustee for the purposes of securing a debt. In most states, it also merely creates 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 non-judicial sale held by the trustee. It is also possible to foreclose them through a judicial proceeding.[citation needed] Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


Most "mortgages" in California are actually deeds of trust. The effective difference is that the foreclosure process can be 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.[citation needed]


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.[citation needed] A trust instrument (also sometimes called a deed of trust, where executed by way of deed) is an instrument in writing executed by a settlor used to constitute a trust. ...


Mortgage lien priority

Except in those few states in the United States that adhere to the title theory of mortgages,[1] either a mortgage or a deed of trust will create a mortgage lien upon the title to the real property being mortgaged. The lien is said to "attach" to the title when the mortgage is signed by the mortgagor and delivered to the mortgagee and the mortgagor receives the funds whose repayment the mortgage secures. Subject to the requirements of the recording laws of the state in which the land is located, this attachment establishes the priority of the mortgage lien with respect to other liens on the property's title.[2] Liens that have attached to the title before the mortgage lien are said to be senior to, or prior to, the mortgage lien. Those attaching afterward are said to be junior or subordinate.[3] The purpose of this priority is to establish the order in which lien holders are entitled to foreclose their liens in an attempt to recover their debts. If there are multiple mortgage liens on the title to a property 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. In law, lien is the broadest term for any sort of charge or encumbrance against an item of property that secures the payment of a debt or performance of some other obligation. ... The vast majority of states the United States employ a system of recording instruments that affect the title of real estate as the means for publicly documenting land titles and interests. ... Foreclosure is the equitable proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owners failure to comply with an agreement between the lender and borrower called a mortgage or deed of trust. Commonly, the violation of...


Notes and references

  1. ^ Kratovil, Robert; Werner, R. (1981). Modern Mortgage Law and Practice, 2nd, Prentice-Hall, Inc., Sec 1.6. ISBN 9780135957448. 
  2. ^ The failure to record a previously made mortgage may, under some circumstances, allow a subsequent mortgagee's mortgage to be recognized as prior in right to the otherwise prior mortgage.
  3. ^ Of course, the lienholders can agree among themselves to a different priority arrangement through subordination arrangements. See, R. Kratovil and R. Werner Modern Mortgage Law and Practice Chs. 30 & 38 (2nd Ed. Prentice-Hall, Inc.)

This article or section is in need of attention from an expert on the subject. ...

See also


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