( Originally Published 1918 )
A Mortgage is a conveyance of property, either real or personal, given to secure payment of a debt, or the performance of some special act. When the debt is paid the mortgage becomes void and of no value.
Names of Parties.—The person mortgaging his property is called the mortgagor, and the per-son to whom the mortgage is given the mortgagee.
In real estate mortgages, as usually written, the person giving the mortgage retains possession of the property, receives all the rents and other profits and pays all taxes and other expenses until breach of condition and foreclosure.
Must Be in Writing.—All real estate mortgages must be in writing, signed and sealed. The time when the debt, to secure which the mortgage was given, is due must be plainly stated and the property conveyed must be clearly described and located. (See paragraph on description, seventh under the head of "Deeds.")
Must Be Acknowledged.—A mortgage pledging real estate must be acknowledged like a deed, before a proper public officer, and should then be recorded.
The Accompanying Bond of Note.—It is usual not only to insert a covenant of promise in the mortgage to pay the debt, but for the mortgagor to give also his bond or note as evidence of indebtedness. In this case the mortgagee may sue and recover upon the note or bond, or he can foreclose his mortgage; and if there is not sufficient realized from the sale to pay the debt he may recover the balance on the bond or note.
The bond or note is drawn precisely like any other instrument of the kind. In the case of notes, it is customary to state therein that they are secured by a mortgage of even date.
Redemption.—By what is termed equity of redemption the mortgagor is given further time to redeem his property after the debt for which the mortgage is security falls due. Within this extended time he must pay the full amount of the mortgage with the interest prescribed by the statute.
The Equity of Redemption is such a positive right that it may be sold, and is of such a character that the law refuses to allow it to be fore-gone, even by an agreement to that effect in the mortgage.
Power of Sale.—A power of sale is not essential to a mortgage, but it may in some states contain a clause permitting the sale of the property, if forfeited by nonpayment of debt, as required. A mortgage may be so drawn that the property can be sold without decree from the court, according to the statutes of the state, or by agreement of the parties from the court, according to the statutes of the state, or by agreement of the parties.
Mortgages are sometimes so drawn that a single failure in paying the interest at a stated time renders due the whole, both principal and interest, and gives the mortgagee authority to sell the property long before the debt is due.
Assignment.—A mortgage can be assigned, but unless the bond or note is also assigned it is worthless and gives no right to foreclose; and such assignment should include also the bond or note and should be acknowledged and recorded.
Making Payments.—If the wording in the mortgage or note is, "payable on or before" a certain date, the creditor cannot compel payment before that date (if the interest is kept up).
A debtor cannot compel his creditor to accept payment before it is due, because he has a right to have his money remain on interest according to agreement.
Whenever payment is made upon a note or bond or mortgage it should be carefully indorsed upon the instrument.
Foreclosure.-If the mortgagor fails to meet the conditions of the mortgage then the mortgagee may foreclose. The method of foreclosure differs in the several states. In some the statutes prescribe a short, summary method; in others an action of court is necessary; in still others either method is legal.
Form of Mortgage—Without Power of Sale —Good for Any State
THIS INDENTURE, made this fourth day of March, in the year of Our Lord one thousand nine hundred and —, between Samuel F. Allen and Louise Allen, his wife, of the Village of Fulton, in the County of Jackson, and State of Iowa, parties of the first part, and Robert Beatty, of the Village of Fulton, in the County of Jackson, and State of Iowa, party of the second part:
Whereas, The said parties of the first part are justly indebted to the said party of the second part in the sum of one thousand dollars secured to be paid by a certain bond or obligation bearing even date herewith, conditioned for the payment of the said sum of one thousand dollars on the fourth day of March, nineteen hundred and --- and the interest thereon to be computed from date hereof at the rate of six per centum per annum, to be paid annually.
It being thereby expressly agreed, that the whole of the said principal sum shall become due after default in the payment of interest, taxes or assessments, as hereinafter provided.
Now, Therefore, This Indenture Witnesseth, That the said parties of the first part, for the better securing the payment of the money aforesaid, with interest thereon ac-cording to the tenor and effect of the said Bond or Obligation, above mentioned, and also in consideration of the further sum of One Dollar to them in hand paid by the said party of the second part, at the delivery of these Presents, the receipt whereof is hereby acknowledged, have granted, bargained, sold, remised, released, conveyed, aliened and confirmed, and by these Presents do grant, bargain, sell, remise, release, convey, alien and confirm unto the said party of the second part, and to his heirs and assigns for-ever, all the following described lot, piece, or parcel, of land, situate in the County of Jackson and State of Iowa, and known and described as follows, to-wit:
(Here describe property.)
To Have and to Hold the Same, Together with all and singular the tenements, hereditaments, privileges, and appurtenances thereunto belonging, or in any wise appertaining; and also, all the estate, interest, and claim whatsoever, in law as well as in equity, which the said parties of the first part have in and to the premises hereby conveyed, unto the said party of the second part, his heirs and assigns, and to their only proper use, benefit, and behoof, forever;
Provided always, And these Presents are upon this EX-PRESS CONDITION, that if the said parties of the first part, their heirs, executors, or administrators, shall well and truly pay, or cause to be paid, to the said party of the second part, his heirs, executors, administrators, or as-signs, the aforesaid sum of money, with interest thereon, at the time and in the manner specified in the above mentioned Bond or Obligation, according to the true intent and meaning thereof, then and in that case these Presents, and everything herein expressed, shall be absolutely null and void.
And The said parties of the first part, for Ourselves and Our heirs, executors, and administrators, do hereby covenant and agree with the said party of the second part, that at the time of the delivery hereof, the said parties of the first part, are the lawful owners of the premises above granted, and seized thereof, in fee simple absolute; that we and our heirs will WARRANT AND DEFEND the above granted premises in the quiet and peaceable possession of the said party of the second part, his heirs and as-signs FOREVER, that they are free from all incumbrances whatsoever, and that the said parties of the first part will, in due season, pay all taxes and assessments on said premises, until said indebtedness aforesaid shall be fully paid.
And The said parties of the first part do hereby expressly release and waive all rights, under and by virtue of the Homestead Exemption Laws of the State of Iowa in and to said premises.
In Witness Whereof, We, the said parties of the first part, do hereunto set our hands and seals the day and year first above written.
SAMUEL F. ALLEN, [SEAL]
Signed, sealed and delivered in the presence of
STATE OF COUNTY OF }SS.
I, in and for said County, in the State aforesaid, DO HEREBY CERTIFY, that personally known to me to be the same person whose name subscribed to the foregoing Instrument, appeared before me this day in person, and acknowledged that he signed, sealed and delivered the said Instrument as his free and voluntary act, for the uses and purposes therein set forth, including the release and waiver of the right of homestead.
Given Under my hand and seal, this day of .. A.D. .
HOW TO FORECLOSE A MORTGAGE
The methods of foreclosing vary in different states, but the following general steps are common in many states:
1. Application to a court for authority to foreclose.
2. Hearing the parties by the court.
3. Referring the case to a master in chancery or referee.
4. Advertising the property.
5. Selling it to the highest bidder at auction.
6. Deeding it to the purchaser.
7. Mortgagee taking and retaining possession of the property.
8. Paying over to the mortgagor any surplus fund remaining from the sale.
Since the interests involved in giving and taking a mortgage on real estate are of such great importance that a mistake in executing it or in complying with its conditions may subject the interested parties to much trouble and heavy losses, the mortgage, bond and note should be drawn up with the utmost care and the conditions laid down strictly and promptly complied with.
Illinois Form of Promissory Note Secured by Mortgage
$3,000. New York, March 15, 19-.
One year after date I promise to pay to Robert Hartless Three Thousand Dollars at the First National Bank of New York City, with interest at the rate of seven per cent per annum, making such sale, on demand, to the party for value received.
This note is secured by a mortgage of even date here-with on certain real estate (describe the premises).
Signed, JULIUS HAWTHORNE.
Real Estate Mortgage to Secure Payment of Above Note
This INDENTURE, made this 15th day of March, in the year one thousand nine hundred and —, between Julius Hawthorne, of the City, County, and State of New York, and Margaret, his wife, parties of the first part, and Robert Hartless, of the City of Chicago, County of Cook, and State of Illinois, party of the second part,
Witnesseth, That the said party of the first part, for and in consideration of the sum of Three Thousand Dollars, does grant, bargain, sell, and convey unto the said party of the second part and to his heirs and ,assigns all, (give a complete description of the premises mortgaged), together with all the hereditaments and appurtenances thereto belonging or in anywise appertaining.
This conveyance is intended as a mortgage to secure the payment of the above note according to the condition of the same, and these presents shall be void if such payment be made.
But in case default shall be made in the payment of the principal or interest as above provided, then the party of the second part, his executors, administrators, and assigns, are hereby empowered to sell the premises above described, with all and every of the appurtenances or any part there-of, in the manner prescribed by law, and out of the money arising from such sale to retain the said principal and interest, together with the costs and charges of making such sale, and the surplus if any there be shall be paid by the party making such sale, on demand, to, the party of the first part, his heirs, or assigns, etc.
In witness whereof said party of the first part hereunto set their hands and seals the day and year first above written.
JULIUS HAWTHORNS. [SEAL]
MARGARET HAWTHORNE. [SEAL]
Signed, sealed, and delivered in presence of
Release and Satisfaction of Mortgage
Know All Men by These Presents, That the debt secured by mortgage upon the following described .... property, situated in in .... County, in the State of to- wit: (describing it), wherein Chas. Anderson is grantor and Fred Johnson is grantee, and dated a .... of which is .... in volume page in the office of the (register or recorder) of deeds of .... County, ... has been fully satisfied, in consideration of which said mortgage is hereby released. FRED JOHNSON.
A Chattel Mortgage is a mortgage on personal property. Persons sometimes desire to use their personal property as security and yet retain possession of it, as, for instance, furniture, machinery, tools, a library, etc. This can be done by giving a chattel mortgage, which is really a conditional sale of the property to the creditor, whose property it becomes if the debt is not paid when due.
A chattel mortgage must be in writing, and must be recorded.
Rules Governing Chattel Mortgages
1. A chattel mortgage must, in some of the states, be acknowledged or sworn to before a justice of the peace or before the county judge. In Georgia chattel mortgages or mortgages on personal property are governed by the same rules as to attestation and record as realty mortgages.
2. It runs out in two years or such other time as prescribed by the state statute. Frequently the statute provides for renewing the mortgage for another specified period or term by recording or filing certain papers, and in some states, e. g., in New England, the mortgage does not run out by lapse of time at all.
3. No seal is necessary, though commonly used, in a chattel mortgage.
4. A person cannot mortgage property which he does not own. Hence a chattel mortgage made by a merchant upon all goods which he may hereafter purchase is held in some states to be of no effect or to be effective only in a qualified way. In other states, however, such provision is held to be effective.
5. If the mortgagor retains possession, the instrument is of no avail as against third parties unless recorded in accordance with the law of the state where it is made.
6. In some states where the mortgage lien runs out in a specified time fixed by statute or at maturity, the property must be taken possession of by the mortgagee at the expiration of such time or at maturity, or other creditors can claim the property.
7. In some states if the debt is not paid when due the property becomes the creditor's and the debtor is entitled to no surplus, but in most states the creditor, in order to enforce his lien on the goods, must foreclose the mortgage by sale, either under a power of sale contained in the mortgage or by similar proceedings provided by statute. There usually is a provision for notice to the owner. If the sale produce a surplus, this surplus goes to the owner or to his assigns.
8. It is a criminal offense for the mortgagor to sell the property covered by a chattel mortgage unless by consent of mortgagee in mortgage or otherwise.
9. Mortgages of personal property should have a clause providing for the equity of redemption.
10. A mortgagee may sell or transfer his mortgage to another, but the purchaser cannot sell the property until the mortgage matures.
Chattel Mortgage, with Power of Sale
Know All Men by These Presents, That I, John F. Thomas, of the City of Wilmington, State of Delaware, in consideration of five hundred dollars to me paid by Henry A. Davis, of the city and State aforesaid, the receipt of which is hereby acknowledged, do hereby grant, bargain, and sell unto the said Henry A. Davis, and his assigns, forever, the following goods and chattels, to wit:
[Here insert an accurate list of the articles mortgaged, giving a full description of each.]
To Have and to Hold, All and singular the said goods and chattels unto the mortgagee herein, and his assigns, to their sole use and behoof forever. And the mortgagor herein, for himself and for his heirs, executors, and administrators, does hereby covenant to and with the said mortgagee and his assigns, the said mortgagor is lawfully possessed of the said goods and chattels, as of his own property; that the same are free from all incumbrances, and that he will war-rant and defend the same to him, the said mortgagee and his assigns, against the lawful claims and demands of all persons.
Provided, Nevertheless, That if the said mortgagor shall pay to the mortgagee, on the tenth day of May, in the year 19-, the sum of five hundred dollars, then this mortgage is to be void, otherwise to remain in full force and effect.
And Provided Further, That until default be made by the said mortgagor in the performance of the condition afore-said, it shall and may be lawful for him to retain the possession of the said goods and chattels, and to use and enjoy the same; but if the same or any part thereof shall be attached or claimed by any other person or persons at any time before payment, or the said mortgagor, or any person or persons whatever, upon any pretense, shall attempt to carry off, conceal, make way with, sell, or in any manner dispose of the same or any part thereof, without the authority and permission of the said mortgagee or his executors, administrators, or assigns, in writing expressed, then it shall and may be lawful for the said mortgagee, with or without assistance, or his agent or attorney, or his executors, administrators, or assigns to take possession of said goods and chattels, by entering upon any premises wherever the same may be, whether in this county or State, or elsewhere, to and for the use of said mortgagee or his assigns. And if the moneys hereby secured, or the matters to be done or performed, as above specified, are not duly paid, done, or performed at the time and according to the conditions above set forth, then the said mortgagee, or his attorney or agent, or his executors, administrators, or assigns, may by virtue hereof, and without any suit or process, immediately enter and take possession of said goods and chattels, and sell and dispose of the same at public or private sale, and after satisfying the amount due, and all expenses, the surplus, if any remain, shall be paid over to said mortgagor or his assigns. The exhibition of this mortgage shall be sufficient proof that any person claiming to act for the mortgagee is duly made, constituted, and appointed agent and attorney to do whatever is above authorized.
In Witness Whereof, The said mortgagor has hereunto set his hand and seal this tenth day of May, in the year of our Lord one thousand nine hundred and —.
JOHN F. THOMAS. [SEAL]
STATE OF DELAWARE,
This mortgage was acknowledged before me by J. F. Thomas, this tenth day of May, A. D. 19—.
N.B.—In Tennessee a chattel mortgage is not valid against creditors of the mortgagor until registered; nor against purchasers from the mortgagor until registered, unless the purchaser had actual notice of the prior mortgage. The mortgagor may remain in possession of the mortgaged chattels, if they are not necessarily consumable in their use, and it will be no badge of fraud until after the maturity of the debt.