Mortgages and Related Security… How Are You Liable? (Part 1 of 9)

Podcast Episode 1: “Mortgage Basics 1/9 – History Is No Mystery.”

Mortgages are a fact of life for most people buying and selling real estate. For the first episode of the Tales from the Trenches podcast, we’re going to talk about some of the background and history of these all important legal contracts. If you’re getting a mortgage, lenders require you to have a lawyer’s assistance. In this mini series of podcasts, veteran Alberta real estate attorney Barry McGuire gives you the straight goods on all things mortgage!

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Mortgages and Related Security… How Are You Liable?

A.        Background Info on Mortgages

Way back in the day, a “mortgage” involved securing a loan by transferring legal title to land from the “mortgagor” (the borrower) to the “mortgagee” (the lender).  If the debt was repaid on time, title to the land was transferred back to the borrower.  If not, the lender kept the title and the borrower was thrown off the land.

“Mortgage” comes from the French words “mort” (dead) and “gage” (to pledge or promise);  so the literal translation is a ‘dead pledge’ meaning that if the debt was not paid, the land so pledged was ‘dead’ to the borrower.

Enough history!  Today, a mortgage is simply a loan contract secured by a charge against land.  Even if the loan goes into default, title to the land remains in the name of the borrower and the borrower remains in physical possession of the land until the very end of the legal process involved in enforcing a mortgage, commonly known as ‘a foreclosure’ or ‘foreclosure proceedings’.

Remember that your lender is a kind of silent partner.  As long as payments are made in full and on time and there is no other ongoing default, you will never hear from your lender.  But miss a payment or two and your lender quickly becomes your adversary.  Your lender will take action on any default under the mortgage by a series of legal steps as outlined in Appendix A.

Under our constitution, mortgage law is a provincial responsibility.   So although the concept is similar across the country, and indeed throughout the western world, each province has its own set of rules.   To further complicate the picture, banking law is a federal responsibility, so federal legislation comes into the picture in relation to banking issues such as high ratio lending.

The message is, for any specific mortgage or foreclosure question, YOU MUST CONSULT experienced legal counsel in the province where the land is located. If your property is in Alberta, contact Barry McGuire now!

“Mortgage” image courtesy of used under Creative Commons Attribution-Sharealike 3.0.