MORTGAGE, the securing "money or money's worth" by making it a charge upon property, real or personal, so that if the debt be not paid by a time agreed upon by the parties, the creditor may foreclose or sell the property and pay himself out of the pro ceeds. In English law this is done by an actual or executory con veyance of the property to the creditor, subject only to its being defeated if the debt should be paid at the time fixed. Under the altered system initiated by the Law of Property Act, 1925, mortgages are charged without conveyance of the property to the mortgagee. (See HYPOTHEC.) The mortgage of English law is the result of two distinct influ ences. Its origin and form belong to the common law the re strictions by which it is made to serve the purpose of a security only, and nothing more, belong to the courts of equity. In the eye of the common law the mortgagee was the owner of the estate conveyed in the mortgage ; in equity the mortgagor remains the real owner, and the mortgagee is merely an encumbrancer. At law, after failure of payment, the land belonged absolutely to the mort gagee, while in the meantime, before payment, the legal estate was considered to be vested in him, subject only to being defeated by payment at the proper time. The court of chancery first interfered in the reign of James I. to decree a redemption after forfeiture, and a case in the reign of Charles I. decides that payment after forfeiture has the same effect as payment before. The right of the mortgagor to redeem his estate after it has been forfeited, ac cording to the terms of the deed, is called his equity of redemp tion. No agreement between the parties was suffered to oust the jurisdiction of the court, or to deprive the debtor of his equity of redemption. And this equity, at first regarded as a mere right of the debtor, became established in course of time as an estate in land which descended to the heirs of the mortgagor. In spite of the terms of the mortgage, the owner of the land is still the owner. It may be a question whether a given deed is a conveyance or a mortgage, and the court, in deciding, will look at all the circum stances of the case, and will treat it as a mortgage when it was the real intention of the parties that it should operate as a security only.
A mortgagee may, however, on default of payment file a bill of foreclosure requiring the mortgagor to pay the amount of the debt with interests or costs by an appointed day, or submit to be deprived of his equity of redemption. The effect of failure to pay by the time appointed would be to make the mortgagee absolute owner of the estate; but the court in any foreclosure suit may, at the request of either side, order a sale instead of a foreclosure. The mortgagee is entitled to retain out of the proceeds of the sale the amount of his principal, interest and costs, the surplus belong ing to the mortgagor.
An equitable mortgage is constituted simply by the deposit of title-deeds in security for money advanced. Any subsequent legal mortgagee, having notice of the deposit, will be postponed to the equitable mortgagee, and when the legal mortgagee has not in quired as to the title-deeds the court will impute to him such knowledge as he would have acquired if he had made inquiry. A Welsh mortgage is one in which an estate is conveyed to a creditor, who takes the rents and profits in lieu of interest and without account, the estate being redeemable at any time on payment of the principal. Any form of property, with few exceptions, may be mortgaged.
United States.—In America the common law mortgage was adopted in many States with such incidents as the English law had attached to it. Equity courts intervened to prevent strict foreclosure or the forfeiture of the equity of redemption upon non-payment of the debt, insisting that foreclosure should be only made by judicial sale. Many States, however, permit the mort gagee to reserve a power of sale in the deed, which he may exer cise without the intervention of the court. In about one-third of the American States the common law mortgage no longer exists, a mortgage having the effect of giving the mortgagee a legal lien upon the property, the mortgagor still retaining title. The prac tical differences between this and the common law mortgage are not great. Chattel mortgages are also common in the United States, recording of such mortgages being required by most States in order that the mortgagee's rights shall prevail against innocent purchasers of the chattel from the mortgagor.