Mortgage Derived

Mortgage Derived

Mortgage (derived from mort dead and gage a pledge), a charge which a borrower (the mortgagor) gives to a lender (the mortgagee) upon a part or the whole of his property. There are two kinds of mortgage; legal and equitable.

With a legal mortgage a lender has control of the property if the borrower fails to repay the loan made to him. With an equitable mortgage requiring deposit of title-deeds with, generally, a memorandum of deposit the lender will have to incur much trouble and expense before he can obtain the sanction of a court to dispose of the property unless certain specific conditions are incorporated in the memorandum.

In banking, if a banker takes a mortgage for a fixed amount it ends the relation of banker and customer and the banker's position is akin to that of an ordinary mortgagee. The advance is made on a separate loan account and not on a working account, and the only entries in the account are credits which reduce the loan. As each credit reduces the amount due under the mortgage, any fresh withdrawal is not covered by the mortgage. The form of mortgage often taken by bankers is to secure all moneys owing at a time with a covenant that it shall have the right to sell the property immediately on default, after demand, or in a stated period after demand. In such a mortgage the relation of banker and customer continues.

In the event of a mortgagor's bankruptcy, if the property is not sufficient to cover the debt, the mortgagee normally seeks a valuation of the security and claims upon the bankrupt's estate for the difference.

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