Mortgagor Versus Mortgagee
A mortgage is a public notice filed in the county courthouse notifying anyone interested that a lien exists on a piece of real property. (A lien is the legal right to keep or sell the property of a debtor as payment for a debt.) The obligation to pay a loan is created by signing a promissory note. The terms and conditions of the loan (the amount of the loan, the amount of the monthly payment, the interest rate, and the number of payments) are described in detail on the note. Some notes are extensive legal contracts, while others are simple to read and written in plain English. The trend has been to make the notes or loan documents consumer friendly and easier to comprehend.
There are many different legal terms used to describe a note. Sometimes called a
When talking about mortgages there are two entities: the mortgagor and the mortgagee. Most people easily confuse the terms. The mortgagee is the bank or lender. The mortgagor is the person (or the persons) that borrows the money.
The mortgagee (the bank or lender) receives the mortgage from the mortgagor. To remember the terms easily, think of paychecks, employers, and employees. Who gives the money and who receives it? Salary is paid by the employer to the employee. Similarly, with a mortgage, the monthly payment is given from the mortgagor to the mortgagee.
The mortgagor also takes on additional responsibilities when signing a note or installment loan contract. For example, the mortgagor is required to purchase and maintain adequate hazard insurance. Most often the mortgagor purchases a homeowner's policy, which will protect the property against losses from fire, storms, vehicle, or other damage. Other standard obligations include the payment of all property taxes and the adequate maintenances of the property.
The note offered by the mortgagor and presented to the mortgagee is always a written agreement. It is signed by the mortgagor and held or maintained by the mortgagee. The mortgage is always secured by real property (the real estate), and it is pledged as collateral for the loan. Should the mortgagor not make the agreed payments, the mortgagee maintains the right to repossess and take over ownership of the real estate in a foreclosure.
The promissory note is a legally binding document. It creates an obligation on the part of the borrower to pay back the borrowed funds, plus interest, to the lender. Although different terms are used in different jurisdictions, the purpose always remains the same. Payments on the loan, including interest, must be paid, and failing to do so, the lender has the right to foreclose on the loan.
The mortgage, a public document, alerts anyone searching the title of the property at the county courthouse that a lien exists. The mortgage is the public notice that a promissary note has been signed by the property owner.
A mortgage is often thought of as “the loan.” The mortgage does not create the legal obligation to pay back the borrowed money. It simply notifies the public that a note has been signed, pledging the property as collateral on the loan.
The mortgage serves to alert any potential buyer (or another lender) that a loan exists and must be paid in full before a clear title to the property can be obtained. A mortgage notice prevents the property owner from selling the property without the buyer knowing a lien exists. It is up to the buyer to learn of an existing mortgage by searching the property records at the courthouse of the county where the property is located. It also alerts any potentail lender if another loan has been made to the property owner, preventing duplicate loans secured by the same piece of real estate.
