A mortgage is an interest in land created under a contract, not a loan. Although almost all mortgage agreements contain a promise to pay off a debt, a mortgage is not a debt in itself. It can best be described as evidence of a religion. Most importantly, a mortgage is a transfer of a legal or equitable interest in land, provided indispensable condition That interest will be returned upon execution of the terms of the mortgage contract. A mortgage agreement usually transfers the interest in the borrower’s land to the lender. However, the transfer has an attached condition: if the borrower performs the obligations of the mortgage contract, the transfer becomes void. This is the reason why the borrower is allowed to remain the title holder as a registered owner. In practice, he retains title to the land but the lender has the right to interest on the said land.
Thus, a mortgage is, in essence, the transfer of ownership of the land as security for the payment of the principal debt or the discharge of another obligation for which it was granted. In a mortgage contract, the borrower is called the mortgagee and the lender is called the mortgagee.
History of Mortgage Law
Mortgage law originated in the English feudal system as early as the 12th century. At that time, the effect of the foreclosure was to legally transfer the ownership of the land and possession of the land to the lender. This transfer was “absolute”, subject only to the lender’s promise to re-transfer title to the borrower if the specified amount is repaid by the specified date
On the other hand, if the borrower fails to comply with the terms, the interest in the land automatically becomes the lender and the borrower has no other claims or resources under the law. There were two basic types of mortgages in feudal England:living bail‘, Latin for ‘living pledge’ whereby the borrower used the income from the land to pay off the debt, and ‘Bail for the dead‘, Latin for ‘dead pledge’ where the lender was entitled to income from the land and the borrower had to raise money elsewhere to pay off the debt. Whereas at first only ‘living pledges’ were legal and ‘dead pledges’ were considered a violation of usury laws and religious teachings, by 14th century Only dead vows remained and they were all very legal and religious.They are clearly still very religious in the 21st century.
The express contractual terms of the mortgage
Below is an analysis of the clauses contained in most mortgage contracts. However, it must be emphasized that the wording varies from contract to contract, and that the types of clauses change to correspond to certain types of pledged securities.
[ ] salvation
When the mortgagee fulfills his obligations under the contract, the mortgage will be void and the mortgagee will be obligated to re-transfer the legal interest to the mortgagee.
[ ] convertibility
All covenants entered into by the mortgagee are binding on him, his heirs, executor and management. This is the case whether it is the legal interest held by the mortgagee or the heirs, executors, administrators or assigns of the mortgagee.
[ ] personal covenant
The contractual promise made by the borrower is his personal covenant. Because of this, they do not work with the land, so that the lender can sue the borrower under his personal covenant even if the borrower sells the interest in the land to someone else who has taken over the mortgage. In practical terms, this means that until the original mortgage contract becomes effective, the original mortgage is always liable.
[ ] Address safety
The creditor acknowledges and warrants that he is the owner for a small fee and has all the rights and powers involved in such ownership, including the right to transfer the land to the mortgagee.
[ ] free and clear
This is the essence of security for a debt: the title deed must be free and free from all encumbrances (subject to certain legal rights, such as taxes), until the title is transferred. On transfer, the interest is transferred to the lender while the borrower retains ownership. But in case of default, the borrower also surrenders possession to the lender with any lien in priority. This can be a tax lien or, in the case of a default on the second mortgage, the first mortgage.
[ ] Other affirmations
In the event of default, the mortgagee promises to do whatever is necessary to allow the lender to take ownership of the property.
[ ] previous burdens
Except for statutory mortgages, the mortgagee must file an acknowledgment of any and all fees that have priority over the contracted mortgage, otherwise the lender expects and has the right to register in first priority.
[ ] insurance
Mortgage undertakings either to keep the buildings on said land secured at all times or, alternatively, to provide a cash bond covering the cost of replacing said buildings.
[ ] Relinquish all claims
The Borrower waives any claims it may have against the Lender in respect of the property, except for the Borrower’s right to request reconversion upon repayment of the principal debt.
[ ] Acceleration in default mode
Acceleration is a condition which states that upon default the principal and interest of the principal debt becomes due and payable immediately at the option of the mortgagee.
[ ] quiet possession
The provision that, until default, the lender shall have silent tenure of said lands.
[ ] omnibus condition
In the event of default of any sum of money which must be paid by the mortgagee under the terms of the mortgage contract, the mortgagee may pay that sum and the sum paid shall immediately be added to the principal of the debt secured under the contract and interest shall be charged at that rate stipulated in the contract.
[ ] repairs
The creditor has a duty and obligation to maintain the lands and buildings on it in good condition and in a reasonable condition of restoration, and may not give up or waste anywhere on the mortgaged property. This clause is intended to preserve the value of the lender’s security.
[ ] predecessor
The mortgagee is not obligated to provide any part of the money intended to be secured under the mortgage contract. For example, when a portion of the money is paid, and then a builder lien is raised against the land, the lender will demand that the foreclosure be removed before more money is offered. Note that construction liens take precedence over mortgages.
[ ] sale condition
Also known as receivable on sale, the mortgagee agrees to pay, at the mortgagee’s choice, all principal and interest on the principal debt when the property is sold. This clause effectively prevents the mortgage from being incurred by anyone who is not acceptable to the lender. Obviously, the lender’s other option is not to request the loan if the mortgagee sells to a buyer acceptable to the lender. In the absence of this condition, the mortgage is always presumable.
Luigi Frascati