Mortgagee

Definition

A mortgagee is an entity or individual that provides a mortgage loan to a borrower (the mortgagor) for the purchase of real estate. The mortgagee holds a lien or title to the property as security until the debt is fully paid off. If the borrower defaults on the loan, the mortgagee has the legal right to seize and sell the property to recover the owed amounts. Common mortgagees include banks, credit unions, and other financial institutions.

Examples

Homebuyers Savings Bank and Abel: Abel obtains a mortgage loan from Homebuyers Savings Bank to buy a house. In this scenario, Homebuyers Savings Bank is the mortgagee, as they finance the loan and hold a lien on Abel’s property until he repays the loan in full.
XYZ Credit Union: Sarah borrows money from XYZ Credit Union to purchase a new home. XYZ Credit Union becomes the mortgagee and has a claim on her property until the mortgage is paid off.

Frequently Asked Questions

What rights does a mortgagee have?

A mortgagee holds a lien on the mortgaged property and has the right to foreclose on the property if the borrower defaults on the loan.

Can a mortgagee sell the property without the mortgagor’s approval?

Yes, if the borrower defaults, the mortgagee can initiate foreclosure proceedings and sell the property, through legal means, to recover the debt.

Is a mortgagee always a bank?

Not necessarily. A mortgagee can be any financial institution or individual that provides the loan and secures it with the property.

What happens after the borrower pays off the mortgage?

Once the mortgage is fully paid, the lien on the property is released, and the borrower (mortgagor) gains full title ownership of the property.

Mortgagor: The individual or entity that borrows money to purchase real estate and pledges the property as security for the loan.

Lien: A legal claim on a property by a creditor to ensure the payment of a debt or obligation.

Foreclosure: The process in which a mortgagee seizes and sells a property when the borrower fails to meet the terms of the mortgage agreement.

Title: The legal documentation proving ownership of a property.

Online Resources

References

Investopedia. “Mortgagee.” 2023.
Consumer Financial Protection Bureau. “Mortgages and Home Loans.”

Suggested Books for Further Studies

Mortgage Backed Securities: Products, Structuring, and Analytical Techniques by Frank J. Fabozzi
The Mortgage Professional’s Handbook by Marty McGuire
Real Estate Finance & Investments by William Brueggeman and Jeffrey Fisher

Real Estate Basics: Mortgagee Fundamentals Quiz

### Who can be a mortgagee? - [ ] Only federal banks - [x] Any financial institution or individual lender - [ ] Only credit unions - [ ] Only investment firms > **Explanation:** A mortgagee can be any financial institution or individual that offers a mortgage loan secured by real estate. ### What does a mortgagee hold as security for a loan? - [ ] The borrower's bank account - [x] A lien on the property - [ ] Life insurance policy - [ ] The borrower's non-real estate assets > **Explanation:** A mortgagee holds a lien on the property as security for the mortgage loan until the debt is fully repaid. ### What legal action can a mortgagee take if the borrower defaults? - [ ] Reduce the loan amount - [ ] Extend the loan term - [x] Foreclose on the property - [ ] Release the lien > **Explanation:** If the borrower defaults, the mortgagee can foreclose on the property to recover the owed amounts. ### What documentation proves the mortgagee's claim on a property? - [ ] Property appraisal - [ ] Insurance certificate - [ ] Warranty deed - [x] Mortgage loan agreement > **Explanation:** The mortgage loan agreement includes the terms that establish the mortgagee's lien or claim on the property. ### Will a mortgagee still have claims after the mortgage is fully paid? - [x] No, the lien is released - [ ] Yes, until a title insurance is issued - [ ] Yes, forever - [ ] No, only for a few months > **Explanation:** Once the mortgage is fully paid, the lien on the property is released, and the mortgagee no longer has claims on the property. ### Who provides the financing in a mortgage agreement? - [x] The mortgagee - [ ] The mortgagor - [ ] The real estate agent - [ ] The appraiser > **Explanation:** The mortgagee provides the financing for the mortgage agreement. ### In real estate terms, who is 'Abel' in the given example? - [x] Mortgagor - [ ] Mortgagee - [ ] Creditor - [ ] Lender > **Explanation:** In the given example, Abel is the mortgagor who borrows money to purchase the real estate. ### Who typically initiates foreclosure proceedings? - [ ] The mortgagor - [ ] The property seller - [ ] The real estate agent - [x] The mortgagee > **Explanation:** The mortgagee initiates foreclosure proceedings when the borrower defaults on the loan. ### In what case might the mortgagee release the lien on the property? - [ ] When the property value decreases - [x] When the mortgage is fully repaid - [ ] When the borrower sells the property - [ ] When interest rates change > **Explanation:** The mortgagee releases the lien on the property once the mortgage is fully repaid. ### What is an example of a mortgagee? - [x] A credit union - [ ] A property appraiser - [ ] A real estate consultant - [ ] A homeowner > **Explanation:** A credit union is an example of a mortgagee because they can provide mortgage loans and hold a lien on the property.