Also known as: mortgagors · borrower · debtor
Written by attorneys · grounded in primary & secondary sources — see below
The borrower who grants a mortgage on real property to secure repayment of a debt or performance of an obligation. The mortgagor retains possession and an equity of redemption. Upon default the mortgagee may foreclose on the pledged property.
Ming Ma borrowed funds from Metro Bank to purchase a warehouse. At closing Ming Ma executed a mortgage pledging the warehouse as collateral for the loan. When Ming Ma later defaulted on payments, Metro Bank initiated foreclosure proceedings against the warehouse.
Maya Malik held a fee simple conditional in a parcel and mortgaged it to Mercury Industries to secure a business loan. A judgment creditor later recorded a lien against Maya Malik's interest. The creditor could reach only the transferable portion of the estate that Maya Malik held at the time the lien attached.
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Michelle Murphy, a general partner in a limited partnership that became a debtor in bankruptcy, had granted a mortgage on her personal residence to secure a partnership obligation. The judgment creditor could not levy on Michelle Murphy's personal assets until the partnership assets proved insufficient.
Meredith Maxwell, a partner whose partnership entered bankruptcy, had previously mortgaged partnership property to secure a separate personal loan. The judgment creditor could not execute against Meredith Maxwell's personal assets until partnership assets were shown to be insufficient.
Melanie Morris granted a mortgage on her home in a title-theory jurisdiction. The mortgagee held legal title while Melanie Morris retained only the equity of redemption. Upon default the mortgagee could take possession without first obtaining a foreclosure decree.
Megan Moore held a fee tail preserved for a single lifetime and mortgaged the land to Mosaic Retail. A judgment creditor recorded a lien against Megan Moore's interest. The creditor could reach only those interests Megan Moore had the power to transfer when the lien attached.
The mortgagor retains possession of the property and the equity of redemption. The mortgagor may also prepay the debt in many jurisdictions and is entitled to a release or satisfaction of the mortgage upon full payment.
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Under the lien theory the mortgagor retains legal title and possession. Under the title theory the mortgagee holds legal title and the mortgagor holds only the equity of redemption. The intermediate theory blends elements of both approaches.
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The mortgagee may foreclose to satisfy the debt from the proceeds of the property. The mortgagor loses the equity of redemption once foreclosure is completed and the redemption period expires.
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A due-on-sale clause permits the mortgagee to accelerate the debt upon an unauthorized transfer. Federal law generally enforces such clauses, though some state restrictions may still apply.
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A voluntary deed in lieu transfers title to the mortgagee in satisfaction of the debt. The transaction must be voluntary and supported by consideration, and it discharges the mortgage while potentially preserving or extinguishing junior liens depending on jurisdiction.
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…whether the transfer of ownership is the result of an arm's-length negotiation, an inheritance, or the dissolution of a bankrupt debtor.[^maj-4] II Much of the difficulty of this case stems from genuine confusion as to when the taking Palazzolo alleges actually occurred. According to Palazzolo's theory of the case,…