Mortgage

In depth

A mortgage is a two-party security instrument: the borrower (mortgagor) pledges the property to the lender (mortgagee). On default, the lender forecloses to convert the lien into a sale and proceeds. Misconception: a mortgage is not a loan; it is the security for the loan, which is documented by the promissory note. Practically, in lien-theory states, mortgages are the standard security device for both bank and seller financing. The lender does not hold title; the borrower does. Recording the mortgage perfects the lender's lien priority. In seller financing, a purchase money mortgage is given by the buyer back to the seller. Mortgages are governed by state law, with significant variation in foreclosure procedures, redemption rights, and deficiency judgments.