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1 Intro
A mortgage is a device used to create a lien on real estate by contract. The mortgage is an instrument that the borrower (called the mortgagor ) uses to pledge real property to the lender (called the mortgagee) as security for a debt, also called hypothecation.
The mortgage instrument contains two parts:
- the mortgage, which is the pledge
- the note, which is the actual evidence of the debt and promise to repay (sometimes called a promissory note).
To protect the lender, a mortgage is recorded in the public records creating a lien (when there are multiple liens, order of recording determines priority). 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 the lien of the mortgage is prior to anyone else's claim.
2 History
At common law, a mortgage was a conveyance 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 met --- usually, but not necessarily, the payment of a debt by the original landowner. Hence the word "mortgage," Law French for "dead pledge;" that is, it was absolute in form and in theory required no further steps to be taken by the creditor.
In many U. S. states, however, a mortgage has been converted by statute to a device for creating a security interest in land. When the landowner fails to perform on the obligation secured by the mortgage, the mortgage holder must file a foreclosureForeclosure is the legal proceeding in which a bank or other creditor gets the deed on a piece of real property due to the owner default of their promissory note. In most common law states, there are two sorts of foreclosure: "strict foreclosure," in whic to cause the property to be sold at auction, usually by the sheriffSheriff is both a political and a legal office held under English common law, Scots law or American common law, or the person who holds such office. Modern usage United States In the United States a sheriff is generally the highest elected law-enforcement.
3 Mortgage finance industry
Mortgage lending is a major category of the business of financeFinance is the application of the principles of financial economics to an inter-related set of monetary problems. Its aim is in the optimal use of financial instruments. In the case of a company, this generally involves balancing risk and profitability an in the United States of AmericaThe United States of America also referred to as the United States U. America ¹ or the States is a federal republic in central North America, stretching from the Atlantic in the east to the Pacific Ocean in the west. It shares land borders with Canada in. Mortgages are commercial paperCommercial paper is a short-term debt security issued by large banks and corporations. and can be conveyed and assigned freely to other holders. In the USA the Home Owners Loan CorporationThe Home Owners Loan Corporation was a New Deal agency established in 1933 to refinance homes to prevent foreclosure. See also Fannie Mae Ginnie Mae Freddie Mac., the Federal Housing AdministrationThe Federal Housing Administration was begun as part of the New Deal in 1934. It guaranteed private home mortgages ( FHA loans) and provided funds to promote housing construction, especially for poorer people. See also Fannie Mae Ginnie Mae Freddie Mac De administer the programmes colloquially known as " Ginnie MaeThe Government National Mortgage Association GNMA also known as Ginnie Mae was created by the United States Federal Government through a 1968 partition of the Federal National Mortgage Association. The GNMA is a wholly owned corporation within the United" and " Freddie Mac" (aka the GSE's—the government sponsored entities) to foster mortgage lending and thus to encourage home ownership and construction.
