A mortgage is given to secure a debt or obligation. This debt or obligation should be set forth in the mortgage, and the time when it is to be paid or performed should be set forth. The mortgage should also contain a description of the property mortgaged. A complete and accurate description, such as is used by surveyors, is the best form. By this means, a person can locate the property directly from the description given in the mortgage. It is sufficient if the description given enables a person to locate the property either by reference to another record containing a description, or by its own terms. A surveyor's description is better, however. A mortgage should contain the names of the grantor and the grantee.
The mortgagor is entitled to his equity of redemption. That is, he is entitled to the right to file a petition in a court of equity, offering to pay the mortgage debt, interest, and damages to the mortgagee, and asking for a return of the property. This may be done at any time before foreclosure by the mortgagee. Foreclosure is discussed under a separate section.
311. Power of Sale and Delivery in Escrow. If a mortgagor stipulates in the mortgage that he waives, or will not enforce his equity of redemption, the law does not permit the mortgagee to enforce such a stipulation. It is regarded as against public policy, and illegal. Whenever there is a mortgage, there is an equity of redemption in favor of the mortgagor.
Some mortgages contain a stipulation that in case the mortgagor fails to pay the mortgage debt when due, the mortgagee may sell the property, deduct his claim costs and expenses, and return the balance to the mortgagor. Such mortgages are called power of sale mortgages. They are valid and enforceable. The mortgagor's equity of redemption is protected, in that he receives the balance of the proceeds of the sale of the mortgaged premises, after the mortgage debt and expenses are paid. The sale, under a power of sale mortgage, must be public and bona fide.
A mortgage must be signed by the mortgagor. This is called in law, execution of the mortgage. The mortgage must also be attested. This means that the signing must be in the presence of a witness or witnesses. This requirement is a statutory one. Some states require only one witness, others two. If a mortgage is to be recorded, the signature of the mortgagor must be acknowledged before a notary public or officer authorized to administer oaths. This is called acknowledgment. It means that the mortgagor acknowledges the making of the signature in the presence of an officer authorized to administer oaths. The officer writes a certificate of this acknowledgment on the mortgage. Acknowledgment is a statutory requirement. A mortgage will not be received for record by the public recorder, unless it has been acknowledged.
A mortgage given by a married man must contain a waiver of dower by the mortgagor's wife, or the wife will have a dower estate therein if her husband dies before she dies. The mortgage of a married man should contain a statement that the wife waives her dower interest, and the wife should sign the mortgage before witnesses, and acknowledge her signature. A mortgage, like any written contract, does not become effective until delivered. By delivery is meant giving possession of the instrument to the mortgagee or his agent, with intent that it is to become effective from that date. If a mortgage or written instrument is delivered to a third person to be held for a certain purpose or until a certain time, this is called delivery in escrow.
312. What Interest in Real Estate May be Mortgaged. Any interest in real estate which is the subject of transfer or sale may be mortgaged. One who has the absolute title, called fee simple interest, in real estate may mortgage it. A mortgage is not regarded as a transfer but merely as a security for a debt or obligation. The mortgagor retains an interest called his equity of redemption. For all practical purposes, a mortgage of real estate means that the mortgagee may sell the property mortgaged upon failure of the mortgagor to pay the mortgage debt when due. The mortgagee may keep enough of the proceeds of the sale to satisfy the mortgage debt. The equity of redemption of a mortgagor and the remainder must be returned to the mortgagor, or his right to the proceeds of the sale of mortgaged premises, after the mortgage debt is paid, is an interest which in turn may be mortgaged.
A mortgagor may give successive mortgages so long as he finds persons willing to accept them as security. In practice, second and third mortgages on real estate are common. Not only may real estate be mortgaged, but anything permanently connected with real estate, such as crops, trees, horses, and buildings. Articles of personal property which have become permanently annexed to real estate are called fixtures. (See Fixtures, chapter on Real Estate.) If title to real estate has been obtained by fraud, a valid mortgage may be given to one who has no notice of the fraud. The principle involved is that a title obtained by fraud or duress is voidable. The party defrauded may obtain a reconveyance of the property as against the party practicing the fraud, but not as against innocent purchasers who have had no notice of the fraud. If, however, a conveyance is attempted by means of a forgery, no title to the property passes to the purchaser, who in turn can convey nothing by mortgage or otherwise. Similarly, a party who has conveyed his interest in real estate absolutely, by deed or contract, has nothing left to convey, and cannot give a mortgage. An interest in real estate less than absolute ownership, as a life interest, or a mere lease, or term for years, is an interest which may be mortgaged.
313. Recording Mortgages. To be effectual against creditors, subsequent purchasers, and mortgagees, most of the states require by statute, that mortgages be recorded with the public recorder of the county where the property is located. These statutory provisions do not render mortgages ineffectual as between original parties. A gives a mortgage on his house and lot to B. B does not have the mortgage recorded. If A fails to pay the mortgage debt when due, B may foreclose. As against A, B's mortgage is enforceable without being recorded. If, however, A gives a subsequent mortgage to C, and C records his mortgage, C's mortgage is superior to B's. If A sells the property to D after mortgaging it to B, B not recording the mortgage, D, upon having his deed recorded, takes the title free of B's mortgage. If A gives B a mortgage, B not having the mortgage recorded, and E obtains a judgment against A and levies upon the real estate mortgaged to B, E obtains a lien superior to B's.
The statutes of a few states provide that mortgages become effective from the time they are left with the recorder for record. The recorder stamps on the mortgage the time it is left for record, and the mortgage becomes effective from that time. Suppose A on the second of February gives a mortgage on his house and lot to B, for $500.00, and then on the fifth of February gives a mortgage on his house and lot to C for $500.00. If C has his mortgage recorded February sixth, and B has his mortgage recorded February seventh, C's mortgage is superior to B's. In the few states where a mortgage does not become effective until received for record, the one first received for record is superior to others, even though the mortgagee first leaving his mortgage for record takes his mortgage with actual notice of the prior mortgage. The general rule is that one who takes a mortgage with actual notice of other mortgages, takes subject to such mortgages.