Mortgagor's Responsibility
Whenever money is borrowed to purchase real estate, the lender will require the borrower to sign a note and mortgage. The note, no matter what it is called in any given jurisdiction, will specify the obligations and responsibilities of the borrower. The mortgage note legally requires the mortgagor to repay the loan to the mortgagee.
The mortgage note will clearly indicate what the mortgagor must do. Basic terms of the loan are clearly indicated. They include:
Amount of the loan
Length of the loan
Number of payments
Interest rate
Amount of each payment
The date of the final payment
Any other terms and conditions
As already mentioned, a mortgagor will be required to maintain adequate hazard insurance to protect the property (which is the collateral for the loan) against losses. If there are condominium or homeowner association fees, the note will require the mortgagor to pay those assessments. The note will require compliance with building and municipal property codes, the payment of property taxes, and other similar duties.
There could be other terms or conditions. For example, if the property is located in a floodplain, the note might require the borrower to maintain adequate flood insurance protection.
A mortgage note may also include other important terms and conditions of the loan. For example, it will include any prepayment penalty (assessed if the loan is paid off prematurely).
The mortgagor must make the monthly payments. That sounds simple enough, but too many borrowers overlook this simple requirement. If the borrower makes a payment late, it is customary that a late payment fee must be paid. The amount of that fee is clearly specified in the mortgage note. While most mortgages require payment on the first day of the month, any day of the month can be used.
No one is concerned if the monthly payment arrives a day or two after the specified date (of course, the lender wants the money before the due date). But legally speaking, no action is taken when a loan payment arrives at the lender's office a few days after it was due.
For the vast majority of borrowers, the mortgage process remains simple and unproblematic. The borrower (or mortgagor) makes the agreed monthly payment to the lender (or mortgagee). She sends off the monthly payment on time, the bank accepts it, and over the period of the loan the balance declines until it is paid off. At that point the mortgagor owns the property free and clear. That's the way it is supposed to work, and does, for most but not all borrowers.
