Monday, February 11, 2008

About Mortgages

Much is the same with real estate loan agreements and mortgages.

When Jack secure a home loan from a bank he will sign two of the most important documents he will ever sign. The first is the promissory note. Promissory note outlines the terms and conditions of the loan and obligation to make the specified monthly payments to the bank. Technically speaking the note is the signed document that acknowledges the existence of a debt, and the promise to repay the debt.

The second document is the mortgage contract. Mortgage contract is a pledge of security collateral for the debt. This legal instrument is created to give mortgagee (lender) certain rights to the property in the event the mortgagor (borrower) fails to perform as agreed in the loan agreement by pledging the property being financed as collateral. The mortgage given to a bank is not evidence of a debt.

A mortgage simply pledges the property as security for the payment of the loan.

There are several types of mortgages prepared for all kinds of situations. In some states, the contract actually transfers the property to the lender until the terms of the mortgage contract are met. In other states, the mortgage acts as a lien against the

property. The borrower retains possession and use of the property, as long as the terms of the mortgage contract are met.

Theodore J. Dallow, a recognized foreclosure expert and editor-in-chief of "FORECLOSURES", a professional newsletter, points out the five basic covenants in a mortgage agreement:

1. The borrower agrees to pay the principal mortgage debt.

2. The borrower will keep the property insured against fire, for the benefit of the lender.

3. No building on the property will be removed or destroyed without the consent of the lender.

4. The full amount of the principal portion of the loan will become due and payable, in the event that the borrower defaults on the payment of the principal, interest, taxes or assessments.

5. The borrower will agree to the appointment of a receiver, if foreclosure proceedings occur.

The contract states that the borrower will protect the property and pay the loan back. It also states that if the borrower doesn't abide by the agreements, the lender will accelerate the loan if payments aren't made and that the borrower agrees to the foreclosure process should it become necessary. Therefore, by signed contract, the lender must accelerate the loan and must foreclose on the property, should it become necessary.

The lender is regulated and is loaning out the consumers' moneys. The lender must protect its depositors. By law and by contractual obligation, the lender must accelerate and/or foreclose.


Errol Wall said...

Wow!! really awesome post about real esate Mortgage. I wanna read more post like this one. Few days ago, I have found similar useful source at Ontario Mortgage Agent blog that also great one.

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