What is a Mortgagee?

Adrienne Kendrick

A mortgagee is an entity that acts as a lender to a borrower for the purpose of buying a piece of real property. In a real estate transaction, the lender advances the necessary funds to the borrower or mortgagor in order to complete the deal. Because buying a home is quite often a lengthy endeavor, the lender and borrower begin a professional affiliation that continues over the entire time of the loan. Mortgagees actually have funds available to make the loan, and should not be mistaken for what are called mortgage "agents." Mortgage agents do not lend money or make loans of any kind; they simply act on behalf of actual lenders.

Defaulting on a mortgage often ends with a foreclosure of the home.
Defaulting on a mortgage often ends with a foreclosure of the home.

The function of a mortgagee is rather straightforward. The lender assists the mortgagor in finding an appropriate home loan, determines a proper rate and loan term to fit the borrower's needs and financial abilities, processes and underwrites the required paperwork, and ultimately finances the loan. The entire loan process is concluded at closing, when the lender supplies the funds for the property and the mortgagor agrees to pay back the created debt. Prior to the finalization of the loan, borrowers must sign a loan contract that gives the lender a secure interest in the home or property. Simply put, both parties must agree that the dwelling or land will act as collateral for the impending loan.

Mortgagees lend money for the purchase of a home.
Mortgagees lend money for the purchase of a home.

Should there come a time when the borrower cannot fulfill his requirement to repay the debt, a mortgagee can take possession of the mortgaged property. In such cases, a mortgagee also has a right to sue for the mortgage money. Until a mortgage is paid in full, a lender has a claim that is secured by the mortgage. The standard cure for a lender in the case of default is foreclosure.

When a property goes into foreclosure in the US, it is usually handled in one of two ways: judicial sale or power of sale. In either case, the property is sold by the mortgagee, which then uses any proceeds from the sale to satisfy the remaining mortgage debt. A strict foreclosure is available in some places, wherein the borrower is given a set amount of time to pay off the debt; if he fails to do so, ownership of the property reverts to the mortgagee, who is not required to sell it.

It is important for borrowers to be mindful that timely submission of all mortgage payments is required in order to avoid foreclosure. Additionally, the property or home purchased is not really the borrower's property until the debt is paid in full. To realize true home ownership, one must pay the loan in full. It's not always an easy task, but it is one that will pay off in the long-run.

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