A mortgagee is any party or institution that lends money to another party for the purpose of buying or refinancing a loan using real estate as collateral. The borrower is known as the mortgagor.
Why a Mortgagee Lends Money
A mortgagee lends money based on the assumption that a mortgagor can pay back the loan. Mortgagees will require prospective borrowers to submit income and financial documents to verify their income and credit worthiness of the applicant. Additionally, lenders will require a property buyer to contribute a down payment towards the home purchase. This ensures the borrower has a vested interest in the property which reduces the chance the borrower will default on payments.
A mortgagee provides loans in return for collecting interest on the money they lent. In return for lending the money, the mortgagee has the right to place a lien on the property that expresses their interest in the property. A borrower cannot sell a property without first paying off the lenders full principal amount.
When a borrower defaults on their debt, the mortgagee has the right to initiate foreclosure proceedings to recoup their debt. Lenders typically do not do this until after the three month’s of the borrower falling behind on mortgage payments. The law ensures lenders have the ability to reclaim the collateral used for the loan in order to satisfy their original mortgage amount.