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104-485: The nature and scope of a mortgage broker's activities vary with jurisdiction. For example, anyone offering mortgage brokerage in the United Kingdom is offering a regulated financial activity; the broker is responsible for ensuring the advice is appropriate for the borrowers' circumstances and is held financially liable if the advice is later shown to be defective. In other jurisdictions, the transaction undertaken by

208-601: A freedom of contract regime. Mortgage and foreclosure were used as a means by the Dutch and other colonists to acquire land from native peoples in North America. This was a successful endeavor partially due to cultural differences in the understanding of land ownership. The practice followed a series of steps. Colonists would draw native peoples into their debts through credit that the natives would then need to create mortgages to repay. The debt would generally be one that

312-436: A lender as a security for a debt, usually a mortgage loan . Hypothec is the corresponding term in civil law jurisdictions, albeit with a wider sense, as it also covers non-possessory lien . A mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to

416-583: A "Direct Lender". A mortgage broker is normally registered with the state, and is personally liable (punishable by revocation or prison) for fraud for the life of a loan. A loan officer works under the umbrella license of an institution, typically a bank or direct lender. Both positions have legal, moral, and professional responsibilities and obligations to prevent fraud and to fully disclose loan terms to both consumer and lender. Agents of mortgage brokers may refer to themselves as "loan officers". Mortgage brokers must also hold individual and company licenses through

520-597: A Mortgage Broker, "A mortgage agent is generally someone who finds the best mortgage for each client based on that client’s income, credit, and property profiles." In British Columbia mortgage brokers are licensed by the Financial Institutions Commission (FICOM) Throughout Canada, high ratio loans are insured by either the Canada Mortgage and Housing Corporation , Genworth Financial or Canada Guaranty. As of 2017, Canada has seen

624-400: A borrower. Further, the mortgage broker would have to be more compliant with regulators. Costs are likely lower due to this regulation. Mortgage bankers and banks are not subject to this cost reduction act. Because the selling of loans generates most lender fees, servicing the total in most cases exceeds the high cost act. Whereas mortgage brokers now must reduce their fees, a licensed lender

728-451: A commission. Mortgage specialists in banks and building societies can also be considered to be ‘tied’ brokers, insofar as they may only offer products sold by that lender. The Financial Conduct Authority (FCA) requires that a mortgage broker describes its range accurately to consumers, and stipulates that one of the following disclosures be used to describe the service offered (as appropriate): A mortgage broker can be either compensated by

832-453: A comprehensive review of the UK mortgage market which ran from 2009 to 2012 and came into force on 26 April 2014, resulted in some dramatic changes to the regulated lending environment, most centring on new, stricter affordability requirements and income and expenditure checks. There is also anecdotal evidence to suggest that the amount of time it takes to get a mortgage has significantly increased as

936-404: A conduit between the buyer (borrower) and the lender (banks and non-bank lenders), whereas a loan officer typically works directly for the lender. Many states require the mortgage broker to be licensed. States regulate lending practice and licensing, and the rules vary from state to state. Most states require a license for those persons who wish to be a "Broker Associate", a "Brokerage Business", and

1040-495: A dominant force in the mortgage industry during the late 1990s on the back of aggressive marketing by Aussie Home Loans and Wizard Home Loans . Approximately 35% of all loans secured by a mortgage in Australia were introduced by mortgage brokers in 2008. In March 2012, the share of loans introduced by Mortgage Brokers had risen to 43%. In 2016–2017, mortgage brokers had contributed to $ 2.9 billion to Australian economy. In 2019,

1144-433: A lender may foreclose on the mortgaged property if certain conditions—principally, non-payment of the mortgage loan – apply. A foreclosure will be either judicial or extrajudicial (non-judicial), depending upon whether the jurisdiction within which the property to be foreclosed interprets mortgages according to title theory or lien theory, and further depending upon the type of security instrument used to secure

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1248-481: A lien theory state. Even so, the Georgia Legislature has formally provided for a lender being able to secure its loan by means of having legal title to a collateralized property conveyed to it. The so-called "Deed to Secure Debt" is a security instrument used in the state of Georgia to accomplish securing of a debt by means of the passing of legal title to real property. Though it is characterized within

1352-410: A mortgage broker is to mediate business between clients and lending institutions, which include banks , building societies and credit unions . Tied mortgage brokers offer products from a single lender, while multi-tied brokers offer products from a small panel of lenders. Many tied brokers are linked to estate agents and will refer the agency’s customers to one of a handful of lenders in exchange for

1456-423: A mortgage by legal charge or technically "a charge by deed expressed to be by way of legal mortgage", the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it. To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt

1560-413: A mortgage has the effect of a deed passing legal title, though conditionally, of the mortgaged property to the mortgagee (the lender in a loan agreement being secured by the mortgage), with so-called "equitable title" (which is really equity of redemption ) being retained by the mortgagor (the borrower in the loan). The fact of the mortgagor's retaining of the "equity of redemption" is the fact which renders

1664-422: A mortgage is viewed as creating a lien on the mortgaged property until such a time as an event of default occurs pursuant to the loan contract. After such a time, the same mortgage is construed under title theory. This is accomplished by the inclusion of a stipulation within the loan contract to the effect that the borrower is allowed to retain legal title to the collateralized property with the express agreement that

1768-414: A mortgage within "title theory" jurisdictions. Hypothetically, if "absolute" or "perfect" title were held by a grantee such that the grantor did not retain the equity of redemption , then the grantee/lender would theoretically not have need to foreclose upon the grantor/borrower, but rather might cure a default by simple means of eviction or "summary reposession". However, foreclosure, albeit extrajudicial,

1872-506: A move towards mobile and online technology in the mortgage industry. CIBC has created a mobile app that is presently in beta testing. Companies are incorporating digital technology with a strong aim towards consumer awareness against bank products. Mortgage brokers in the UK are split between the regulated mortgage market, which lends to private individuals, and the unregulated mortgage market, which lends to businesses and investors. Many UK brokerages mediate both types of business. The role of

1976-518: A nonjudicial sale held by the trustee through a power of sale. It is also possible to foreclose them through a judicial proceeding. Deeds of trust to secure repayments of debts should not be confused with trust instruments that are sometimes called deeds of trust but that are used to create trusts for other purposes, such as estate planning. Though there are superficial similarities in the form, many states hold deeds of trust to secure repayment of debts do not create true trust arrangements. Georgia

2080-609: A nonpossessory lien on the title to the mortgaged property, while the mortgagor still holds both legal and equitable title. Four types of security over real property are commonly used in the United States: the title mortgage, the lien mortgage, the deed of trust , and particularly within the State of Georgia, the security deed . In the United States, these security instruments proceed off of debt instruments drawn up in

2184-478: A portfolio lender in the US is ING Direct . The laws have improved considerably in favor of consumers. A mortgage broker must comply with standards set by law in order to charge a fee to a borrower. The fees must meet an additional threshold, that the combined rate and costs may not exceed a lower percentage, without being deemed a "High Cost Mortgage". An excess would trigger additional disclosures and warnings of risk to

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2288-580: A profit on the sale of the loan. The borrower will often get a letter notifying them their lender has sold or transferred the loan. Bankers who sell most of their loans and do not actually service them are in some jurisdictions required to notify the client in writing. For example, New York State regulations require a non servicing "banker" to disclose the exact percentage of loans actually funded and serviced as opposed to sold/brokered. Brokers must also disclose Yield spread premium while Bankers do not. This has created an ambiguous and difficult identification of

2392-644: A provincial license. Mortgage Brokers in Nova Scotia are licensed by Service Nova Scotia and are regulated under the Mortgage Brokers and Lenders Registration Act. Many brokers in Nova Scotia are members of the Mortgage Brokers Association of Atlantic Canada . More information about the various mortgage programs that are available to consumers can be found at Mortgage Managers . In Ontario, mortgage brokers are licensed by

2496-411: A result of the changes. Some mortgage brokers whose in-house underwriting already matches borrowers to appropriate lenders are able to circumvent these delays, making their services more attractive. It is speculated that, because borrowers’ applications are stress-tested on the strength of their ability to make the monthly repayments, increasing numbers of borrowers are opting for mortgage terms exceeding

2600-512: A sale of the property to pay the debt. Many mortgages contain a power of sale clause, also known as nonjudicial foreclosure clause, making them equivalent to a deed of trust. Most "mortgages" in California are actually deeds of trust. The effective difference is that the foreclosure process can be much faster for a deed of trust than for a mortgage, on the order of 3 months rather than a year. Because this foreclosure does not require actions by

2704-615: A wholesaler in place to purchase them. The required cash of a mortgage banker is only $ 500,000 in New York. The remainder may be in the form of property assets (an additional $ 2.00), an additional credit line from another source (an additional $ 10,000,000). That amount is sufficient to make only two median price home loans. Therefore, mortgage lending is dependent on the secondary market, which includes securitization on Wall Street and other large funds. The largest secondary market by mortgage volume are Federal National Mortgage Association , and

2808-555: Is California , where a 1979 ruling of the Supreme Court of California did establish fiduciary duties of mortgage brokers. This means that consumers, in states other than California, may be charged excessive rates and fees and are encouraged to do some shopping around prior to any agreement. Mortgage fraud is when one or more individuals defraud a financial institution by submitting false information willfully. Some mortgage brokers have been involved in mortgage fraud according to

2912-473: Is conditional, and the security deed effectively functions as a mortgage construed under title theory. Upon the execution of such a deed, "legal title" passes to the grantee or beneficiary (usually lender), while the grantor (borrower) maintains "equitable title" to use and enjoy the conveyed land subject to compliance with debt obligations. In this, the security deed in Georgia operates no differently than does

3016-406: Is exactly equivalent to an English mortgage by legal charge or American lien-theory mortgage . In Anglo-Saxon England , when interest loans were illegal, the main method of securing realty was by wadset ( ME wedset ). A wadset was a loan masked as a sale of land under right of reversion . The borrower (reverser) conveyed by charter a fee simple estate , in consideration of a loan, to

3120-474: Is found to be necessary in Georgia to cure a default. Because of the apparently self-contradictory nature of the Georgia statute, the Courts within Georgia have construed the operation of security deeds to mean that the grantor retains the equity of redemption , such that non- or extrajudicial foreclosure is necessary as a remedy for default on a loan. In order to be effectual, security deeds must be recorded in

3224-481: Is given and the property upon which it is to take effect." It is clear, then, that mortgages are construed within the Official Georgia Code and by the Courts of the State of Georgia as placing a lien upon a mortgaged property in favor of the mortgagee, while the mortgagor retains both legal and equitable title to that property. It is equally clear, then, that Georgia is, by virtue of the foregoing facts,

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3328-407: Is often stated to be a title theory state, but such is not the case. Note O.C.G.A. §44-14-30, which states clearly that "A mortgage in this state is only security for a debt and passes no title." Also note O.C.G.A. §44-14-31, which states that "No particular form is necessary to constitute a mortgage. However, a mortgage must clearly indicate the creation of a lien and must specify the debt for which it

3432-410: Is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real estate property to make certain that there are no mortgages already registered on the debtor's property which might have higher priority. Tax liens , in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent

3536-517: Is referred to as the "Equitable Theory of Mortgages". Under lien theory. a mortgage acts to place a lien on the mortgaged property in favor of the mortgagee, and legal title is retained by the mortgagor. Judicial foreclosure is most often necessary as a remedy to default pursuant to mortgages within lien theory jurisdictions, and this process has been found to be cumbersome, time-consuming and costly. Resultantly, lenders within lien theory jurisdictions most often have recourse to non-mortgage instruments for

3640-470: Is unaffected by the second portion of fee generation. This is due to the delay of selling the servicing until after closing. Therefore, it is considered a secondary market transaction and not subject to the same regulation. As of 2007, in the United States the federal law and most state laws do not assign a fiduciary duty on mortgage brokers to act in best interests of their customers. An exception

3744-532: The Federal Home Loan Mortgage Corporation , commonly referred to as Fannie Mae and Freddie Mac , respectively. Loans must comply with their jointly derived standard application form guidelines so they may become eligible for sale to larger loan servicers or investors. These larger investors could then sell them to Fannie Mae or Freddie Mac to replenish warehouse funds. The goal is to package loan portfolios in conformance with

3848-633: The Financial Services Regulatory Authority of Ontario (FSRA), an arms length agency of the Ministry of Finance. To become licensed an individual must meet specific licensing requirements, including passing an approved course. In Ontario there is a difference between a Mortgage Broker and a Mortgage Agent, although they perform much of the same tasks. While the terms Mortgage Broker and Mortgage Agent are similar, and Mortgage Brokers and Mortgage Agents fulfill many of

3952-524: The Nationwide Multi-State Licensing System and Registry (NMLS). The goal of NMLS is to employ the benefits of local, state-based financial services regulation on a nationwide platform that provides for improved coordination and information sharing among regulators, increased efficiencies for industry, and enhanced consumer protection . Loan officers who work for a depository institution are required to be registered with

4056-415: The equity of redemption . This arrangement, whereby the lender was in theory the absolute owner, but in practice had few of the practical rights of ownership, was seen in many jurisdictions as being awkwardly artificial. By statute the common law's position was altered so that the mortgagor (borrower) would retain ownership, but the mortgagee's (lender's) rights, such as foreclosure , the power of sale, and

4160-493: The jurisdiction . In the English-speaking world this means either a general legal practitioner, i.e., an attorney or solicitor , or in jurisdictions influenced by English law , including South Africa , a (licensed) conveyancer . In the United States, real estate agents are the most common. In civil law jurisdictions conveyancing is handled by civil law notaries . Because of the complex nature of many markets

4264-436: The "title theory of mortgages") or hypothecates title by way of a nonpossessory lien (according to the "lien theory of mortgages") to a lender for the performance under the terms of a mortgage note. In slightly less than half of states, a mortgage creates a lien on the title to the mortgaged property. Foreclosure of that lien almost always requires a judicial proceeding declaring the debt to be due and in default and ordering

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4368-682: The Broker with the Lenders that they submit loan applications to. Borrower Paid Compensation is a percentage agreed upon between the Broker and the Borrower, however, some Lenders do not allow the Broker to make less than the fixed percentage amount outlined in the Lender Paid Compensation agreement, therefore, negating any benefit to Borrower Paid Compensation. The fees charged vary from broker to broker, but fees can be justified if

4472-529: The FBAA and MFAA) leveraged the 2019 Federal Election campaign to convince the Liberal Government to back down from introducing an upfront fee-for-service model. These efforts have been described as a 'textbook case of successful grassroots lobbying'. Mortgage law A mortgage is a legal instrument of the common law which is used to create a security interest in real property held by

4576-462: The FBI. Predatory mortgage lending is when a dishonest financial institution willfully misleads or deceives the consumer. Some mortgage consultants, processors and executives of mortgage companies have been involved in predatory lending. Some signs of predatory lending include: Another unethical practice involves inserting hidden clauses in contracts in which a borrower will unknowingly promise to pay

4680-596: The FCA. A regulated mortgage contract is defined in the Mortgages and Home Finance: Code of Business (MCOB) as one which: Mortgage brokers in the UK are also bound by pan-European legislation, such as the EU Mortgage Credit Directive . It is the role of UK legislators to incorporate the directive into the existing UK framework. The broader distinction between consumers and businesses adopted within

4784-454: The Lender (Lender Paid Compensation) or the Borrower (Borrower Paid Compensation), but can never be compensated by both. The maximum amount a mortgage broker can be compensated by either the Lender or the Borrower, is 2.75% of the loan amount. The less that percentage is, the lower the interest rate the broker can get for the borrower. Lender Paid Compensation is a fixed percentage amount set by

4888-495: The MCD is, in some respects, contrary to the current UK framework, and as a result some exemptions previously enjoyed in the UK will be phased out. One example is where borrowers or relatives of borrowers will occupy less than 40% of a property, which is currently not considered regulated business; by 2016, such borrowers will be considered consumers. These transactions will therefore come to be regulated. The Mortgage Market Review (MMR),

4992-548: The Mortgage Broker market share has grown to 59% of the mortgage market, however, the future viability of the sector has been cast into doubt due to recommendations of the Hayne Royal Commission . Commissioner Hayne has recommended that lenders cease paying upfront and trailing commission to Brokers and instead, that the consumer pays a yet-to-be determined upfront fee for service. The industry (led by

5096-577: The NMLS, but not licensed. Typically, a mortgage broker will make more money per loan than a loan officer, but a loan officer can use the referral network available from the lending institution to sell more loans. There are mortgage brokers and loan officers at all levels of experience. A large segment of the mortgage finance industry is commission-based. Potential clients can compare a lender's loan terms to those of others through advertisements or internet quotes. Mortgage brokers can obtain loan approvals from

5200-470: The Official Code of Georgia (the "O.C.G.A.") to be an "absolute conveyance" of title, it is, in fact, not, for the grantor of the deed in this scheme does retain the " equity of redemption ", otherwise known as "equitable title". The nature of the Georgia "Deed to Secure Debt" is set forth in O.C.G.A. §44-14-60, within which (somewhat oxymoronically) it is stated that: "Such conveyance shall be held by

5304-512: The United States. The remaining 32% of loans is retail done through the lender's retail channel, which means the lender does not go through a broker. The banks have used brokers to outsource the job of finding and qualifying borrowers, and to outsource some of the liabilities for fraud and foreclosure onto the originators through legal agreements. During the process of loan origination, the broker gathers and processes paperwork associated with mortgaging real estate . A mortgage broker works as

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5408-507: The ability of lenders to foreclose is extremely limited, and mortgage market development has been notably slower. The relatively slow, expensive and cumbersome process of judicial foreclosure is a primary motivation for the use of deeds of trust , because of their provisions for non-judicial foreclosures by trustees through "power of sale" clauses. There are three legal theories pertaining to mortgages: title theory, lien theory, and intermediate theory. These three theories pertain particularly to

5512-430: The borrower may approach a mortgage broker or financial adviser to help him or her source an appropriate lender, typically by finding the most competitive loan. The debt instrument is, in civil law jurisdictions, referred to by some form of Latin hypotheca (e.g., Sp hipoteca , Fr hypothèque , Germ Hypothek ), and the parties are known as hypothecator (borrower) and hypothecatee (lender). A civil-law hypotheca

5616-507: The borrower remains responsible for any remaining debt, through a deficiency judgment . In some jurisdictions, first mortgages are non-recourse loans, but second and subsequent ones are recourse loans. Specific procedures for foreclosure and sale of the mortgaged property almost always apply, and may be tightly regulated by the relevant government. In some jurisdictions, foreclosure and sale can occur quite rapidly, while in others, foreclosure may take many months or even years. In many countries,

5720-399: The borrower was a single day late in repaying the debt, he forfeited his land to the lender while still remaining liable for the debt. Increasingly the courts of equity began to protect the borrower's interests, so that a borrower came to have under Sir Francis Bacon (1617–21) an absolute right to insist on reconveyance on redemption even if past due. This right of the borrower is known as

5824-433: The borrowers. A "direct lender" may lend directly to a borrower, but can have the loan pre-sold prior to the closing. Few lenders are comprehensive or "portfolio lenders". That is, few close, keep, and service the mortgage loan. The term is known as portfolio lending, indicating that a loan has been made from funds on deposit or a trust. That type of direct lending is uncommon, and has been declining in usage. An example of

5928-437: The broker can expedite the application process, provide support to vulnerable clients and/or search a wide range of mortgages to find the most suitable deal based on the client's circumstances or the chosen property. The FCA's Consumer Duty regulation requires brokers to consider whether their fees represent 'fair value' to the consumer. Owner-occupier mortgage products, and by extension brokers of these products, are regulated by

6032-566: The broker may be limited to a sales job: pointing the borrower in the direction of an appropriate lender, with no advice given, and with a commission collected for the sale. The work undertaken by the broker will depend on the depth of the broker's service and liabilities. Typically the following tasks are undertaken: According to a 2004 study by Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 mortgage brokerage companies that employ an estimated 418,700 employees and that originate 68% of all residential loans in

6136-790: The broker or lender to find him or her a mortgage whether or not the mortgage is closed. Though regarded as unethical by the National Association of Mortgage Brokers, this practice is legal in most states. Often a dishonest lender will convince the consumer that he or she is signing an application and nothing else. Often the consumer will not hear again from the lender until after the time expires and then they are forced to pay all costs. Potential borrowers may even be sued without having legal defense. The laws governing mortgage brokerage in Canada are determined by provincial governments. Most provinces require mortgage brokerage companies to carry

6240-435: The continent—was to execute together the wadset and a separate back-bond according the reverser an in personam right of reverter. An alternative practice imported from Norman law was the usufructory pledge of real property known as a gage of land . Under a gage the borrower (gagor) conveyed possession but not ownership to the lender (gagee) for an unlimited term until redemption. The gage came in two forms: The gage

6344-402: The county of Georgia within which the land is located. Although there is no specific time within which such deeds must be filed, the failure to timely record the deed to secure debt may affect priority and therefore the ability to enforce the debt against the subject property. Yield spread premium A yield spread premium (YSP) is the money or rebate paid to a mortgage broker for giving

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6448-416: The court, the transaction costs can be quite a bit less. The deed of trust is a conveyance of title made by the borrower to a third party trustee (not the lender) for the purposes of securing a debt. In lien-theory states, it is reinterpreted as merely imposing a lien on the title and not a title transfer, regardless of its terms. It differs from a mortgage in that, in many states, it can be foreclosed by

6552-442: The courts to be an absolute conveyance,..." (assumedly meaning an actual conveyance of "absolute" or "perfect" title to the grantee) "...with the right reserved by the grantor to have the property reconveyed to him upon the payment of the debt or debts intended to be secured agreeably to the terms of the contract,..." (in other words, the grantor retains "equitable title", a.k.a. the equity of redemption , which appears to contradict

6656-472: The debt, the mortgagee proceeds against lot Z (Charlie), then lot Y (Bob). The rationale is that the first purchaser should have more equity and subsequent purchasers receive a diluted share. Mortgages may be legal or equitable. Furthermore, a mortgage may take one of a number of different legal structures, the availability of which will depend on the jurisdiction under which the mortgage is made. Common law jurisdictions have evolved two main forms of mortgage:

6760-421: The form of promissory notes and which are known variously as mortgage notes , lender's notes, or real estate lien notes. A mortgage operates to collateralize real property by means of lien or through conditional conveyance of title, depending upon jurisdiction. A mortgage creates a security interest in realty created by a written instrument (traditionally a deed) that either conveys legal title (according to

6864-434: The form of a feoffment , bargain and sale , or lease and release . Since the lender did not necessarily enter into possession, had rights of action, and covenanted a right of reversion on the borrower, the mortgage was a proper collateral security. Thus, a mortgage was on its face an absolute conveyance of a fee simple estate , but was in fact conditional, and would be of no effect if certain conditions were met. The debt

6968-423: The largest secondary wholesale market lenders in the country. For example, Fannie Mae may issue a loan approval to a client through its mortgage broker, which can then be assigned to any of a number of mortgage bankers on the approved list. The broker will often compare rates for that day. The broker will then assign the loan to a designated licensed lender based on their pricing and closing speed. The lender may close

7072-482: The lender (wadsetter) who on redemption would reconvey the estate to the reverser by a second charter. The difficulty with this arrangement was that the wadsetter was absolute owner of the property and could sell it to a third party or refuse to reconvey it to the reverser, who was also stripped of his principal means of repayment and therefore in a weak position. In later years the practice—especially in Scotland and on

7176-499: The lender is secured by taking possession of all the original title documents of the property and by borrower's signing a Memorandum of Deposit of Title Deed (MODTD). This document is an undertaking by the borrower that he/she has deposited the title documents with the bank with his own wish and will, in order to secure the financing obtained from the bank. Certain transactions are recognized therefore as mortgages by equity, which are not so recognized by common law. In most jurisdictions,

7280-455: The lender may foreclose in a non- or extrajudicial manner if the borrower defaults on the loan. In the United States, more states are lien-theory states than are title-theory or intermediate-theory states. In title-theory states, a mortgage continues to be a conveyance of legal title to secure a debt, while the mortgagor still retains equitable title. In lien-theory states, mortgages and deeds of trust have been redesigned so that they now impose

7384-403: The lender; (2) an indenture or bond (the defeasance ) reciting the loan and providing that if it was repaid the land would reinvest in the borrower, but if not the lender would retain title. If repaid on time, the lender would reinvest title using a reconveyance deed. This was the mortgage by conveyance (aka mortgage in fee ) or, when written, the mortgage by charter and reconveyance and took

7488-517: The lienholder from foreclosing and wiping out the mortgage. This type of mortgage is most common in the United States and, since the Law of Property Act 1925 , it has been the usual form of mortgage in England and Wales (it is now the only form for registered interests in land – see above). In Scotland , the mortgage by legal charge is also known as Standard Security. In Pakistan ,

7592-420: The loan and service the loan. They may either fund it permanently or temporarily with a warehouse line of credit prior to selling it into a larger lending pool. The difference between the "Broker" and "Banker" is the banker's ability to use a short term credit line (known as a warehouse line) to fund the loan until they can sell the loan to the secondary market. Then they repay their warehouse lender, and obtain

7696-454: The loan. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale (net of costs) are applied to the original debt. In some jurisdictions mainly in the United States, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions,

7800-529: The loans they originate are sold on the secondary market. The lender earns fees at the closing, and a Service Release Premium , or SRP. The amount of the SRP is directly related to the terms of the loan. Generally, the less favorable the loan terms for the borrower, the more SRP is earned. Lender's loan officers are often financially incentivized to sell higher-priced loans in order to earn higher commissions. Even large companies with lending licenses sell, or broker,

7904-498: The mortgage brokers to disclose this, they decide what fees to charge upfront whereas the direct lender won't know what they make overall until the loan is sold. Also See: Predatory lending & Mortgage fraud Sometimes they will sell the loan, but continue to service the loan. Other times, the lender will maintain ownership and sell the rights to service the loan to an outside mortgage service bureau. Many lenders follow an "originate to sell" business model, where virtually all of

8008-440: The mortgage by demise and the mortgage by legal charge. In a mortgage by demise, the mortgagee (the lender) becomes the owner of the mortgaged property until the loan is repaid or other mortgage obligation fulfilled in full, a process known as "redemption". This kind of mortgage takes the form of a conveyance of the property to the creditor, with a condition that the property will be returned on redemption. Mortgages by demise were

8112-535: The mortgage by legal charge is most common way used by banks to secure the financing. It is also known as registered mortgage. After registration of legal charge, the bank's lien is recorded in the land register stating that the property is under mortgage and cannot be sold without obtaining an NOC (No Objection Certificate) from the bank. Equitable mortgages originate in English Common Law and may lack some legal formalities. In an equitable mortgage

8216-468: The mortgage loan transactions they originate and close. A smaller percentage of bankers service and keep their loans than those in past decades. Banks act as a broker due to the increasing size of the loans because few can use depositor's money on mortgage loans. A depositor may request their money back and the lender would need large reserves to refund that money on request. Mortgage bankers do not take deposits and do not find it practical to make loans without

8320-409: The mortgage to the lender, known as the mortgagee. A mortgage lender is an investor that lends money secured by a mortgage on real estate. In today's world, most lenders sell the loans they write on the secondary mortgage market . When they sell the mortgage, they earn revenue called Service Release Premium . Typically, the purpose of the loan is for the borrower to purchase that same real estate. As

8424-405: The mortgagee may foreclose to recover the outstanding loan. Typically the borrowers will be the individual homeowners, landlords, or businesses who are purchasing their property by way of a loan. Because of the complicated legal exchange, or conveyance , of the property, one or both of the main participants are likely to require legal representation. The agent used for conveyancing varies based on

8528-417: The mortgagee, the lender has the right to sell the property to pay off the loan if the borrower fails to pay. The mortgage runs with the land, so even if the borrower transfers the property to someone else, the mortgagee still has the right to sell it if the borrower fails to pay off the loan. So that a buyer cannot unwittingly buy property subject to a mortgage, mortgages are registered or recorded against

8632-457: The mortgagor and proceeds against other owners in an 'inverse order' in which they were sold. For example, Alice acquires a 3-acre (12,000 m ) lot by mortgage then splits up the lot into three 1-acre (4,000 m ) lots (X, Y, and Z), and sells lot Y to Bob, and then lot Z to Charlie, retaining lot X for herself. Upon default, the mortgagee proceeds against lot X first, the mortgagor. If foreclosure or repossession of lot X does not fully satisfy

8736-440: The natives would be unable to pay in a reasonable time frame and thus foreclosure would be enforced, and the land acquired by the colonists. When a tract of land is purchased with a mortgage and then split up and sold, the "inverse order of alienation rule" applies to decide parties liable for the unpaid debt. When a mortgaged tract of land is split up and sold, upon default, the mortgagee first forecloses on lands still owned by

8840-418: The need to pay the full value immediately from their own resources. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property. Legal systems in different countries, while having some concepts in common, employ different terminology. However, in general, a mortgage of property involves the following parties. The borrower, known as the mortgagor, gives

8944-423: The operation of mortgages, and so provide the key to understanding the differences which exist in the operation of mortgages across jurisdictions. Title theory is "the idea that a mortgage transfers legal title of the mortgaged property from the mortgagor to the mortgagee, which retains it until the mortgage has been satisfied or foreclosed. Only a few American States...have adopted this theory." Under title theory,

9048-568: The original form of mortgage, and continue to be used in many jurisdictions, and in a small minority of states in the United States. Many other common law jurisdictions have either abolished or minimised the use of the mortgage by demise. For example, in England and Wales this type of mortgage is no longer available in relation to registered interests in land, by virtue of section 23 of the Land Registration Act 2002 (though it continues to be available for unregistered interests). In

9152-454: The owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower . The word is a Law French term meaning "dead pledge," originally only referring to the Welsh mortgage ( see below ), but in the later Middle Ages was applied to all gages and reinterpreted by folk etymology to mean that

9256-416: The passing of title under title theory conditional. Mortgages within title theory jurisdictions, then, may be viewed as having the action of what might be called "conditional deeds". Though legal title is passed pursuant to a mortgage therein, the arrangement is generally construed by courts to recognize the mortgagor as "owner" of the mortgaged property within title theory jurisdictions. Even so, foreclosure of

9360-408: The pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure . In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than on other property (such as ships) and in some jurisdictions only land may be mortgaged. A mortgage is the standard method by which individuals and businesses can purchase real estate without

9464-414: The preceding phrase within the same sentence) "...and shall not be held to be a mortgage." (which is true, but only within a "lien theory" jurisdiction). Despite the assertion within the O.C.G.A. of "absolute conveyance", the fact that the grantor of a security deed retains equitable title to the deeded property, means that the conveyance of title effected by said security deed is, in fact, not absolute, but

9568-417: The property as a remedy for default under title theory is most often extrajudicial (non-judicial). Lien theory is "the idea that a mortgage resembles a lien, so that...", pursuant to a mortgage, "...the mortgagee acquires only a lien on the property and the mortgagor retains both legal and equitable title unless a valid foreclosure occurs. Most American states...have adopted this theory." Sometimes this theory

9672-515: The right to take possession, would be protected. In the United States, those states that have reformed the nature of mortgages in this way are known as lien states. A similar effect was achieved in England and Wales by the Law of Property Act 1925 , which abolished mortgages by the conveyance of a fee simple. Since the 17th century, lenders have not been allowed to carry interest in the property beyond

9776-418: The same functions, it is important note that there is in fact a difference. According to Canadian Mortgage Trends the main difference between a Mortgage Broker is that, "...a mortgage broker is a firm or person licensed to deal in mortgages and employ mortgage agents" while "A mortgage agent is an individual authorized to deal in mortgages on behalf of a mortgage broker. While many attribute these functions to

9880-440: The secondary market to maintain the ability to sell loans for capital. If interest rates drop and the portfolio has a higher average interest rate, the banker can sell the loans at a larger profit based on the difference in the current market rate. Some large lenders will hold their loans until such a gain is possible. The selling of mortgage loans in the wholesale or secondary market is more common. They provide permanent capital to

9984-412: The securement of loans, which instruments usually take the form of trust deeds or, within the State of Georgia, the security deed. Deeds always act to convey legal title to a parcel of real property, and the ubiquitous usage of such deeds within lien theory jurisdictions has generally served to subvert the action of mortgages therein. Under what has come to be called the "intermediate theory" of mortgages,

10088-428: The title with a government office, as a public record. The borrower has the right to have the mortgage discharged from the title once the debt is paid. A mortgagor is the borrower in a mortgage—he or she owes the obligation secured by the mortgage. Generally, the borrower must meet the conditions of the underlying loan or other obligation in order to redeem the mortgage. If the borrower fails to meet these conditions,

10192-521: The traditional 25 years. This results in lower repayments but a higher overall interest bill, as well as a longer period servicing debt. According to official figures from the Office for National Statistics (ONS), the percentage of mortgages under 25 years in length fell from 95% to 68% between 2002 and 2012. Mortgage brokers have been active in Australia since the early 1980s, however they only became

10296-447: The true cost to obtain a mortgage. The government created a new Good Faith Estimate (2010 version) to allow consumers to compare apples to apples in all fees related to a mortgage whether you are shopping a mortgage broker or a direct lender. The government's reason for this was some mortgage brokers were utilizing bait and switch tactics to quote one rate and fees only to change before the loan documents were created. Although ambiguous for

10400-399: The underlying debt under the equity of redemption principle. Attempts by the lender to carry an equity interest in the property in a manner similar to convertible bonds through contract have been therefore struck down by courts as "clogs", but developments in the 1980s and 1990s have led to less rigid enforcement of this principle, particularly due to interest among theorists in returning to

10504-472: Was absolute in form, and unlike a gage was not conditionally dependent on its repayment solely from raising and selling crops or livestock or simply giving the crops and livestock raised on the gaged land. The mortgage debt remained in effect whether or not the land could successfully produce enough income to repay the debt. In theory, a mortgage required no further steps to be taken by the lender, such as acceptance of crops and livestock in repayment. However, if

10608-454: Was limited to a term of years and contained a forfeiture proviso ( pactum commissorium ) providing that if after the term the debt was not repaid, title was forfeited to the lender, i.e., the term of years would expand automatically into a fee simple. This is known as a shifting fee and was sufficient after 1199 to entitle the gagee to bring an action for recovery. However, the royal courts increasingly did not respect shifting fees since there

10712-416: Was no livery of seisin (i.e., no formal conveyance), nor did they recognize that tenure could be enlarged, so by the 14th century the simple gage for years was invalid in England (and Scotland and the near continent ). The solution was to merge the latter-day wadset and gage for years into a single transaction embodied in two instruments: (1) the absolute conveyance (the charter ) in fee or for years to

10816-411: Was unattractive for lenders because the gagor could easily eject the gagee using novel disseisin , and the gagee—merely seized ut de vadio “as of gage”—could not bring a freeholder's remedies to recover possession. Thus, the unprofitable living gage fell out of use, but the dead gage continued as the Welsh mortgage until abolished in 1922. By the 13th century—in England and on the continent—the gage

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