Mortgage creditors concept and examples

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Anthony Golden
Mortgage creditors concept and examples

The tomortgage originators are those people or companies (natural or legal person) that have a specific right to enforce a mortgage loan contract. The mortgage holder is the person with the legal right to demand repayment by virtue of the foreclosure; it is a privileged procedure.

This is also the name of an asset item on a company's balance sheet. Within the asset there is an account that are various creditors, which includes both pledge creditors and mortgage creditors.

The mortgagee is a person or company that has a right to receive a mortgage

Normally (although not always) mortgage creditors are banking entities that, if there is a default, have the power to initiate the aforementioned foreclosure against the mortgage debtor. This mortgage loan that grants rights to the mortgagee consists of two parts.

These two parts include, on the one hand, the promise to repay the borrowed money; and on the other, the guarantee through the lien of real estate to guarantee that promise. If the obligee does not pay the mortgagee, he makes his right effective and keeps the property.

The mortgage debtor's repayment obligations vis-à-vis the mortgagee remain the same before and after an assignment to a new mortgage holder. The debtor only has to pay the new mortgagee instead of the old one.

Article index

  • 1 Concept of mortgagee
    • 1.1 Rights of the mortgagee
    • 1.2 Privileged creditor
  • 2 Is it active or passive?
  • 3 Examples of Mortgage Creditors
    • 3.1 Example 1
    • 3.2 Example 2
  • 4 References

Mortgage creditor concept

The term mortgagee refers to a creditor who has a mortgage right on a property owned by the other party: the debtor.

It is a right that implies a guarantee to collect and have preference over other creditors if the property is seized.

Mortgagee rights

The mortgagee has specific rights to safeguard the mortgaged asset that is in the hands of the debtor and can carry out actions that damage its value:

  • Right to request that the property or property object of the mortgage be put up for sale at auction, if the debtor does not comply with its payment obligations. This is called a real mortgage action and it is a foreclosure..
  • Right to request that the mortgagee be the successful bidder of the object of the mortgage pending that his credit concur.
  • Right to go after the mortgaged no matter who owns the property, or the title by which they obtained it.
  • Right to have your mortgage improved if the property is damaged in such a way that your debt cannot be guaranteed.
  • Right to request that a judicial administrator manage the property damaged by the debtor who does not give up after being notified.

Privileged creditor

If there is more than one creditor, the mortgagee has a privileged situation compared to the rest, since it can exercise any of the following actions:

  • Mortgage judicial procedure.
  • Ordinary procedure.
  • Executive procedure.

You can use any action to enforce your privileged rights, although the usual thing is to go to the mortgage or executive judicial procedure.

Is it active or passive?

Mortgage creditors are part of a company's accounting accounts. Any element that can represent a benefit or an economic decline is reflected in the balance sheet, but the question is: do they do it as an asset or as a liability??

The essential difference between assets and liabilities is that assets provide an economic improvement in the future, while liabilities represent and imply a future obligation. If there is a higher proportion of assets than liabilities on the balance sheet, it is a clear indicator that a business is profitable and successful..

A liability in accounting is considered what a natural or legal person must or has as an obligation to comply. In the case of mortgage creditors, they are mortgages payable, obligations with the guarantee of a real estate.

Then, within the balance, the mortgage creditors account increases when new loans are originated that establish a real estate as collateral, and it is reduced when periodic payments are made that resolve the mortgage loan..

Mortgage creditors is a liability account, since it is the amount of mortgage loans that the legal or natural person is obliged to settle.

An asset in accounting is considered to be what a natural or legal person has as resources; that is, the assets and rights of which it is the owner. A mortgage is debt, and if you have mortgage holders, you owe money.

They are debts with guarantees in which the guarantee is not simply the trust in it, but the creditor claims a right over any of the debtor's properties as collateral.

Depending on what type of good makes up the guarantee, it is a pledge or a mortgage; that is, they can be collateral or mortgage creditors.

Examples of Mortgage Creditors

Example 1

Mr. Goméz buys a house and signs a mortgage with the bank to pay the cost of the house in X years. The bank is the holder of the mortgage (mortgagee).

As the mortgage holder, the bank has the right to receive periodic payments from Mr. Gomez and enforce the terms of the mortgage..

Like a car, a stock or even real estate itself, the ownership of a mortgage loan can be transferred from one subject to another..

The mortgage is transferred through a mortgage assignment, which means that the rights of the mortgagee are transferred to a third party.

The new owner of the mortgage becomes the mortgagee and the transferor loses all his rights and is no longer a mortgagee.

Example 2

After issuing a mortgage in favor of Mr. Rodriguez, the green bank (mortgagee) sells said mortgage to another bank, called the blue bank. The blue bank becomes the new mortgage holder (mortgagee).

Payments will be made in favor of the blue bank and it will be the owner of all rights to the mortgage. The original bank is no longer part of the mortgage.

References

  1. Legal Information Institute. Mortgage law. Law.cornell.edu
  2. SFGate. Mortgage holder definition. Homeguide.sfgate.com
  3. Getlegal. Mortgage law. publicgetlegal.com
  4. Selva & Lorente (2018) Content of the mortgagee's right. Mortgage Lawyeralicante.com
  5. Accounting. Main liability accounts. accounting-unides.blogspot.com

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