What Is a Mortgagee?

November 5, 2010 No Comments »
What Is a Mortgagee?

Are You a Mortgagee or Mortgagor?

It’s mortgage Q&A time! Today’s question: “What is a mortgagee?”

No, it’s not a typo. I didn’t leave an extra “e” on the word mortgage by mistake, though it may appear that way. It’s actually a completely different word, somehow, despite the mere addition of the letter E.

Don’t ask me how or why. Seems like a good way to confuse a lot of people, and it’s probably been successful in that department.

Anyway, let’s stop beating up on the English language and define the darn thing, shall we.

A “mortgagee” is the entity that originates (makes) and sometimes holds the mortgage, otherwise known as the bank or the mortgage lender.

The mortgagee extends financing to the “mortgagor,” who is the homeowner or borrower in the transaction. So if you’re reading this and you aren’t a bank, you are the mortgagor.

Mortgagor Rhymes with Borrower, Kind Of

I was trying to think of a good association so homeowners can remember which one they are. I think I came up with a semi-decent, not great one. Mortgagor rhymes with borrower, kind of. Right?

Anyway, the property acts as collateral for the mortgage, and the mortgagee obtains a security interest in exchange for providing financing to the mortgagor.

If the mortgagor doesn’t make their mortgage payments, the mortgagee has the right to take back the property in question, typically through foreclosure.

It can eventually be sold by the mortgage lender to a third party to pay off any attached liens, or mortgages.

So if you’re still not sure, you are probably the mortgagor, also known as the homeowner with a mortgage. And your lender is the mortgagee.

What makes this particular issue confusing is that it’s the other way around when it comes to renters and landlords.

Yep, for some reason a landlord is known as a “lessor,” whereas the renter/tenant is known as the “lessee.” In other words, it’s the exact opposite for renters than it is for homeowners.

I suppose it makes sense that both landlord and borrower are property owners.

What About a Mortgagee Clause?

You may have also heard the term “mortgagee clause” when going through the loan process.

It refers to a legal document that protects the lender’s interest in the property in the event of any damage or loss.

It contains important information about the mortgagee/lender, including name, address, etc. so the insurance company knows exactly who has ownership in the event of a claim.

Remember, while you are technically the homeowner, the bank probably still has quite a bit of exposure to your property if you put down a small down payment.

In summary:

Mortgagee: Bank or mortgage lender
Mortgagor: Borrower/homeowner (you!)

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