Mortgagee

Financial Dictionary -> Mortgages -> Mortgagee

A mortgagee is simply a term used to describe the lender in a mortgage agreement. They may also be called the issuer, mortgage lender, creditor or the proprietor, among other things.

A mortgagee is usually a bank or other financial institution. They will give out a loan (specifically called a mortgage) to property buyers, to fund the purchase of a house. Because mortgages are usually well in to the double figure thousands, to secure their repayment the mortgagee will require collateral in the form of the property itself. Basically the mortgagee owns the property until the mortgage is fully paid back, and if the borrower defaults (cannot pay back the mortgage) the house will be repossessed and usually sold on to cover the loss.

The borrower as per the terms of the mortgage agreement will pay a monthly figure over the span of several years to cover the principal borrowed amount, plus interest. As they pay this off they will gradually build up equity in the home. Think of it as paying a pizzeria every month for another slice of pizza, until the whole pizza is bought. The portion on the Pizza that the borrower has bought so far is called their equity.

The process of foreclosure came to the forefront of public attention during the 2008/2009 subprime mortgage fiasco and economic crisis. Foreclosure is when the borrower has defaulted on the loan and can no longer realistically payoff the debt. The mortgagee will instigate legal proceedings and repossess the house. They will then sell it on to cover the debt owed to them.

Because lending out a mortgage is a risk to the mortgagee, because they might not get a smooth repayment, they will make a series of credit checks on the borrower to determine their reliability and likelihood of payback. If their credit history shows lots of unpaid debts and financial issues, they probably will not be granted a mortgage. If they are it will normally be a smaller amount than usual, to increase the odds of safe repayment.