Mortgage Documents And How They Are Executed To Secure Loans. Mortgage is a contract where an individual offers properties either real property or personal property as a security to a previous loan. It is real estate mortgaged if what is used as collateral is a real property or a piece of land. It is a chattel mortgage if what has been offered as collateral is a personal property.
Since mortgage is always associated with loan, it has become a common overtone that mortgage loan refers to loans secured by mortgages. However, the contract or loan and the mortgage contract are actually two and distinct contracts. The principal contract is the loan agreement and the mortgage contract is only a subsidiary or ancillary. Its term shall not be executed unless the debtor failed the amount loaned.
There are several types of instruments in executing mortgage contracts. In United States, the most commonly used are the mortgage itself or sometimes called as deed of mortgage and the deed of trust. Below are some of these instruments for mortgage loans:
1. The Deed of Mortgage. It is perhaps the most common type of mortgage instrument. It is used by most of the states in the US. The mortgage is annotated at the back of the title of the real estate property purposely to warn the possible buyers that such property is under mortgage. The mortgage creates a lien to the property where the mortgagee can claim in case controversies may arise. Before a foreclosure of a mortgage can be executed, intervention by the court is required so that it has a legal effect and is binding in all parties.
2. Security Deed. This type of mortgage instrument is used in selected states in the US. In this type, the titled property, usually real estate property, used as security for the principal money loan is actually transferred to the mortgagee. It is the title itself that is passed to the beneficiary or the creditor or lender.
The debtor or mortgagor however retained the equitable title to use and enjoy the fruits of the land in compliance to the agreed obligation. The security deed executed to secure the principal money loan must be recorded in the civil registry of deeds where such land is located. Failure to register the security deed means losing priority in the claims over the said land in case there are issues that may arise.
3. Deed of Trust. This type of mortgage instrument is executed by the debtor or borrower to a trustee for securing debt or loan. Just like an ordinary deed of mortgage, it creates merely a lien over the real property and do not transfer title in it. However, they differ since in Deed of Trust, the trustee may foreclose the mortgage properties either judicially or extra-judicially. The former requires application for court order while the latter requires mere agreement of the party.
Parties to a loan may execute other type of instruments to secure the loan. A simple affidavit of undertaking will do, however it is of legal importance that mortgage instruments like those discussed above will do the necessary security and protection for both parties.