Mortgagee
Candlefocus EditorA mortgagee is an entity, usually a financial institution, that lends money to a borrower (mortgagor) for the purpose of purchasing real estate. A mortgage is a security instrument that involves a loan of money by a lender to a homebuyer, wherein the real estate property serves as definitive collateral. By providing the money, the mortgagee takes on legal rights over the property when the loan is secured.
When a borrower is seeking a loan to buy a house they must provide the lender with the necessary documentation that includes the credit score, proof of income, employment history, and their ability to make the payments on the loan. Once the borrower and tax records are reviewed, the lender then determines a loan amount and the terms of the loan, such as the interest rate and repayment terms. The mortgagee also requires the borrower to pay closing costs, which can include title exams, appraisal fees, and points.
When the loan conditions are finally established, the mortgage is drafted and entered into between the mortgagor and the mortgagee. This process creates a legal lien to the mortgaged property, thereby providing the mortgagee with the right to repossess the property in the event of a foreclosure, in which the borrower fails to repay the loan or abide by the deed stipulations. Mortgagees are also provided with the power to claim loan payments and property taxes that are missed by the mortgagor.
The primary purpose of the mortgage and the place of the mortgagee is to provide the lender with a guarantee should the borrower default on their loan obligation, through a legal right over the property. This gives further security to the lender that their investment is safe and that they can receive repayment of their loan with minimal risk, and a timely manner.
Mortgagees are rightly cautious and take into consideration all of the factors before agreeing to a loan. Mortgagees often require the borrower to purchase mortgage insurance and other associated insurance, which provide further protection to the lender. Without a mortgagee’s protection, lenders would be at a considerably great risk when loaning money for real estate purchases and assumingly, mortgages wouldn’t exist.