Also known as: mortgages · mortgaged · mortgaging · security instrument · lien
Written by attorneys · grounded in primary & secondary sources — see below
A security device by which real property is pledged to secure payment of a debt or performance of an obligation. In a deed of trust, title is conveyed to a trustee to hold for the benefit of the lender until the debt is paid. The mortgagor retains possession and the right to redeem.
Michelle Murphy borrows funds from a bank to purchase her home and executes a mortgage on the property along with a promissory note. When Michelle defaults on payments, the bank initiates foreclosure proceedings to sell the home and recover the outstanding balance. The mortgage functions as the security interest allowing the bank to reach the real property upon default.
Melissa Mills, a resident of State A, grants a mortgage on land located in State B to secure a loan from a lender in State C. When a dispute arises over the nature of the interest created by the mortgage, the courts of State B apply their own local law to determine whether the mortgage creates a lien or conveys title. The situs rule directs that the law of the property's location controls the character of the mortgage interest.
Select any source to read its text and confirm it supports the definition.
Mina Mehta holds an estate in fee simple conditional in a parcel of land and later incurs a substantial debt to a judgment creditor. The creditor obtains a lien that attaches to the land while Mina still possesses the power to transfer her interest. The lien permits the creditor to subject the land to payment of the claim to the extent of Mina's transferable interest.
Maria Morales grants an agricultural lien on crops grown on her farm to secure a supply contract with a cooperative. The lien becomes effective upon attachment and the cooperative satisfies all perfection requirements under the applicable section before effectiveness. The lien is therefore perfected at the moment it becomes effective, giving the cooperative priority over later claimants.
Mosaic Retail's board approves a resolution authorizing the company to mortgage its warehouse property to obtain financing for expansion. The mortgage encumbers the real estate regardless of whether the transaction occurs in the usual course of business. The corporate authority permits the encumbrance to secure the repayment of indebtedness.
Monica Morgan purchases property subject to an existing mortgage that contains a covenant restricting further subdivision of the land. The covenant is included in the mortgage instrument as a property security device. The restriction runs with the land and binds subsequent owners as a servitude enforceable by the mortgagee.
Jurisdictions follow title theory, lien theory, or intermediate theory. Under title theory the mortgagee holds legal title while the mortgagor retains equity of redemption. Under lien theory the mortgagor keeps legal title and the mortgage creates only a lien. The intermediate theory blends elements of both and affects possession and foreclosure procedures.
Supporting sources
The equity of redemption allows the mortgagor to redeem the property by paying the debt before foreclosure. Clogging occurs when an agreement unreasonably restricts or waives this right, such as by making redemption impossible or converting the security into an absolute conveyance. Such provisions are void as against public policy.
Supporting sources
A future advance mortgage secures not only the initial loan but also later advances made by the mortgagee to the mortgagor. Validity and priority of those advances depend on state statute and the mortgage terms. Some jurisdictions require advances to be optional or obligatory within a stated maximum or give priority only to advances made before notice of intervening liens.
Supporting sources
An absolute deed as security transfers legal title to the grantee but is intended only as security for a debt. Parol evidence is often admissible to show the deed was meant as a mortgage. Upon repayment the grantee must reconvey, and the arrangement receives mortgage treatment for redemption and foreclosure purposes.
Supporting sources
…compensation. See also Armstrong v. United States , 364 U. S. 40 (1960) (Government’s complete destruction of a materialman’s lien in certain property held a “taking”); Hudson Water Co. v. McCarter , 209 U. S. 349, 355 (1908) (if height restriction makes property wholly useless “the rights of property . . . prevail…