To be received for record, a mortgage must be acknowledged. This means that the mortgagor must acknowledge the signature to the mortgage before a notary public or officer authorized to administer oaths. The officer makes a certificate of the acknowledgment on the mortgage.
314. Transfer of Mortgages and Mortgaged Premises. While, in form, a mortgage is a transfer of real estate, it is regarded merely as security for a debt. The mortgagee is not permitted to transfer title to the real estate. He is, however, permitted to transfer the interest which he possesses in the mortgaged premises. Such a transfer is called an assignment. It is a contract of sale by which the mortgagee sells his interest in the mortgage. (See Assignment of Contract, chapter on Contracts.) For example, if A mortgages his farm to B as security for a one-thousand-dollar promissory note, B cannot convey title to the property mortgaged, to C, but he may sell his interest in the mortgage to C. The mortgage cannot be sold separately from the debt secured. The mortgage, separated from the debt, represents nothing of value. If, in the example above given, B endeavors to sell the note to one person, and the mortgage to another, the purchaser of the mortgage takes nothing. A sale of the debt secured by the mortgage, carries with it the mortgage security, unless it is expressly agreed that the debt is transferred without the security of the mortgage.
If A mortgages his farm to B to secure a promissory note for one thousand dollars, and B sells the note to C, C takes the security of the mortgage as well as the note, unless it is expressly agreed between him and B that the security of the mortgage is not transferred with the note. After B sells C the note, B cannot cancel the mortgage. The mortgage now belongs to C. If A mortgages his farm to B to secure two promissory notes of $500.00 each, and B sells one of the notes to C, in the absence of an agreement to the contrary, C has one-half interest in the mortgage as security for his note. B may, however, expressly stipulate in the sale of his note to C, that B is to retain the entire mortgage security for his own note.
When a debt secured by a mortgage is assigned, the assignee should immediately notify the mortgagor of the assignment, in order that the mortgagee shall pay him, and not the assignor. This is the safe policy to follow, although technically, the mortgagor before paying the mortgage debt should be sure that the mortgagee is still the owner of the note, debt, or other obligation, secured by the mortgage.
A mortgagor is permitted to sell his interest in the mortgaged premises before satisfying the mortgage. He may sell his equity of redemption, or he may sell in such a manner that the purchaser assumes the mortgage. If the mortgagor sells the mortgaged premises, the purchaser agreeing to assume the mortgage as between the mortgagor and the purchaser, the purchaser must pay the mortgage. The mortgagee, however, is not bound by this agreement. He may disregard it. He may accept the benefit of it if he chooses and sue the purchaser on this contract. (See Contract for the Benefit of Third Persons, chapter on Contracts.) If, however, the mortgagee agrees to accept the purchaser of the mortgagor's interest as the debtor, the original mortgagor is relieved thereby.
315. Satisfaction of Mortgages. A mortgage is given as security for a debt or obligation. It is satisfied by payment of the debt, or fulfillment of the obligation. The mortgage debt may be paid by the mortgagor himself, by a purchaser of the mortgagor's interest, by a subsequent mortgagee, or by any one having an interest in the real estate mortgaged. If anyone, other than the mortgagor, pays the mortgage debt to protect his own interest, he is thereby entitled to the benefit of the mortgage. This is called subrogation. If A owes B $5,000.00, and gives B a note for that amount, secured by a real estate mortgage on a farm, C signing the note as surety or guarantor, in case C pays the note upon default of A, C is entitled to B's benefit in the mortgage. Payment of a mortgage debt may be made to a mortgagee, himself, his assignee of the mortgage debt, or any agent or authorized representative of the mortgagee. A party not having an interest in the land cannot voluntarily pay a mortgage debt, and claim the benefit of a mortgage by subrogation. A party interested in the land, even the mortgagor, himself, cannot compel the mortgagee to accept payment before the mortgage debt is due.
Upon payment of a mortgage debt, the title to the mortgaged premises by this act becomes absolute in the mortgagor. At common law, if the mortgagor paid the mortgage debt when due, the mortgagee had to reconvey by deed the mortgaged premises to the mortgagor to give the latter title. But at the present time, a mortgage is not regarded as a conveyance of title, but merely as a security for a debt, the title vesting absolutely in the mortgagor any time he pays the debt before the actual foreclosure of this right by the mortgagee.
When the mortgagor pays the mortgage debt, he is entitled to a written satisfaction of the debt. This is a mere written statement that the mortgage is satisfied, signed by the mortgagee. The mortgagor is thus enabled to have the mortgage cancelled of record, which gives the public notice that the mortgage is no longer effective. The mortgagor presents his written statement of satisfaction to the public recorder, who enters it in his record of the mortgage.
316. Equity of Redemption. A mortgagor does not lose his interest in the mortgaged property by failure to pay the mortgage debt when due. Courts of equity regard a mortgage as a security for a debt, and not a transfer of real property. Even though the mortgagor fails to pay the mortgage debt when due, and in spite of the fact that the mortgage purports to be a transfer of real estate, conditioned only on the payment of the debt described, equity refuses to regard the transaction as a sale, and permits the mortgagor to recover the property by paying the debt, interest, and expenses connected with the mortgage, at any time before the statute of limitations cuts him off. The states have statutes requiring suits of different kinds to be brought within certain periods. These statutes vary somewhat in the different states. Most states require an action by which a mortgagor enforces his equity of redemption, to be brought in about twenty or twenty-one years after the debt becomes due. The mortgagor himself or anyone to whom he transfers, or who acquires his interest, is entitled to the equity of redemption.
If A mortgages his farm to B, to secure a promissory note of one thousand dollars due in one year, A does not lose his right to the property by failure to pay the note when due. He may bring a suit in equity at any time, usually within twenty-one years, after the note becomes due, offering to pay the mortgage debt, interest, and costs, and asking for a return of the property. Equity now gives the mortgagee a right to cut off the mortgagor's right of redemption by foreclosure. This is discussed in the following section.