Mortgage Agreement FAQ - United States


Definitions
What is a mortgage?
It is a security document where there is a transfer of an interest in land as security for a loan or another obligation. This is done via a lien being placed on the property until the balance is fully repaid. Upon full payment, the Mortgagee is responsible to execute a Satisfaction of Mortgage to clear the title of the property.
Who is the Mortgagee?

The Mortgagee is the lender, the party lending the money.

Who is the Mortgagor?

The Mortgagor is the borrower, the party using the property as security to secure a loan.

Who is the Guarantor?

The Guarantor is the person that is jointly liable for the loan if the Mortgagor defaults. Virtually all loan agreements have a guarantor of some form as this provides the lender more avenues to collect the loan should the borrower defaults and is unable to pay.

What is the Principal Amount?

The Principal Amount is the amount of the loan that is owed by the Mortgagor to the Mortgagee. Once the Mortgagor has begun to pay back the borrowed amount, the Principal Amount refers to the amount of money still owing to the Mortgagee.

What is the Interest Adjustment Date?

The Interest Adjustment Date is the date that the Mortgage term begins and interest starts to accumulate.

What is the Maturity Date?

The Maturity Date is the date when the final payment of the balance owing on the mortgage becomes due.

What is annual prepayment of the Principal?

Typically in a mortgage agreement, one has to pay down the accrued interest prior to being allowed to pay down the Principal Amount. The annual prepayment of Principal option allows the Mortgagor to prepay a percentage of the Principal Amount each year before the payment is due. This has its advantages and disadvantages. It is a significant benefit to the Mortgagor as it reduces the total interest paid over the term of the Mortgage. Unfortunately, the Mortgagee will need to reinvest that prepaid money to continue to earn the same or similar interest income.

What is the difference between a Mortgage Agreement and a Deed of Trust?

Essentially both documents serve the same purpose; the borrower is using the property as security to acquire the lender’s loan. A mortgage creates a lien on the Mortgagor’s property and that serves as security for the loan. The mortgage is between the borrower and the lender. While in a Deed of Trust, a lien still exists and serves the same function; however, a third party called the Trustee is also involved. The neutral third party will hold the title temporary for the beneficiary (the lender), until the loan is fully paid. Some common trustees are attorneys or title companies.

In addition, when the borrower defaults, the foreclosure differs. For mortgages, the lender needs to go through judicial foreclosure process which takes longer. However, some states do have non judicial foreclosures available even for mortgages.

Which states use a Mortgage Agreement and which states use a Deed of Trust?

The following states use Mortgage Agreements: Alabama, Arkansas, Connecticut, Delaware, Florida, Hawaii, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, and Wisconsin.

The following states use Deed of Trusts: Alaska, Arizona, California, District of Columbia, Georgia, Mississippi, Missouri, Nevada, North Carolina, and Virginia.

The following states may use either Mortgage Agreements or Deed of Trusts: Colorado, Idaho, Illinois, Iowa, Maryland, Montana, Nebraska, Oklahoma, Oregon, Tennessee, Texas, Utah, Wyoming, Washington, and West Virginia.

Please contact your local county recorder to see which document is used generally if you are in state that may use both documents.

What is a Power of Sale clause?

Typically when the Mortgagor defaults, the Mortgagee would have to go through the state’s judicial foreclosure process in order to foreclose on the property. This process requires time and money for the Mortgagee to carry out in court. However, in some states, if there is a power of sale clause in the mortgage agreement, then the Mortgagee would be allowed to foreclose the property and place it on public sale as long as applicable laws and notices have been observed. This would enable the Mortgagee to bypass the judicial process to recoup the loan faster after the Mortgagor’s default. Essentially, this clause in the mortgage would allow the Mortgagee to foreclose the property without any judicial process if the Mortgagor defaults. It is the Mortgagee’s responsibility to familiarize himself or herself of the state’s statutes to ensure compliance.

Where can I find the appropriate applicable laws for notice and deadline requirements?

Contact your local county recorder office or court clerk for further details.

Property Information
Where can I obtain the legal description of my property?

You should be able to obtain the complete legal description of your property from the County Recorder's Office by providing your municipal address or tax parcel number.

What type of information should be listed under “Further Description”?

You may include any information that further describes the property and its location. For example, you may include an attached floor plan of the house situated on the property, or diagrams demarcating the boundaries of the yard etc. This is not required but can be added merely to clarify what the property encompasses.

Signing and Recording
Who needs to sign the mortgage agreement?

The borrowing party, the mortgagor, needs to sign the agreement. If there is a guarantor involved, he or she is also required to sign the agreement. Any signing relating to the agreement should be done before a notary.

Why is there a large margin at the top of the Mortgage Agreement?

The County Recorder who will file the document requires a 2-3 inch margin at the top of the document so that they can affix a stamp, filing number or some other form of information to help identify and record the document. Do not write in this space.

I do not know when the mortgage agreement will be executed. Can I fill in the date later?

Yes. By selecting 'Unsure' as the date of execution, a blank line will be inserted into the contract so that you can add the correct date manually after printing the document.

Can I get my Mortgage Agreement notarized in a different state than where the land is located?

Most states recognize notarization of documents from other states, but you should contact the County Clerk's Office where the property is located to be sure that they will allow notarization from another state. Our Mortgage Agreement allows for inter-state notarization by enabling you to select in which state you will have the document notarized, regardless of the location of the property.

Does a Mortgage Agreement have to be notarized in order to be valid?

Yes, after the signing of the Mortgage Agreement by the Mortgagor before a Notary, he or she must get it signed and stamped by a notary public to verify that the party's signatures are authentic before it can be filed with the County Clerk's Office.

What do I do with the Mortgage Agreement after it has been signed by the parties and a Notary Public?

After the mortgage is signed before the witnesses and notarized, it should be filed at the land records office in the county where the property is located. This office is referred to by different names in different states, but is usually called the County Clerk's Office, County Recorder's Office, Register of Deeds, or Land Registry Office.

After the Mortgage Agreement has been recorded at the County Recorder's Office, who should it be sent to?

Both the Mortgagor and Mortgagee should receive a copy of the Mortgage Agreement.

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