Immediately following the description of the prop erty is a clause whereby the mortgage is made to cover all fixtures and articles of personal property attached to, or used in connection with the premises described. This clause is intended to bring under the lien of the mortgage such articles upon the premises as may not be real property, or which may be claimed to be per sonalty, such as gas ranges or lighting fixtures. This clause does not of course bring household furni ture under the mortgage but makes it cover all that is essentially a part of the property and necessary for its use.
10. Defeasance the instrument ended here, it would be very similar to a deed. What is known as the defeasance clause, however, makes it a mortgage. This provides that if the amount of the bond and interest is paid "at the time and in the man ner mentioned in the said bond or Obligation, that then these presents and the estate hereby granted shall cease, determine and be void." In some states it is necessary that the defeasance clause be recorded at the same time as the instrument which creates the lien. If it is not so recorded, the mortgagee can take no advantage from recording the conveyance. The law seeks to prevent, as far as pos sible, any hidden conditions of this sort.
The mortgage being personal property, the de feasance clause provides that payment shall be made to the party of the second part, his personal repre sentatives or assigns. The conveyance of the land, however, which follows the language of the deed, is to the party of the second part, his heirs and assigns.
With the defeasance clause included, nothing more is needed to make the instrument a complete and legal mortgage. It is a conveyance of land upon security, the transfer being defeated by the payment of the obligation. The lender, however, requires further and additional safeguards, and for his benefit a num ber of covenants and agreements are inserted.
Property to be sold as a first cov enant is a repetition of the obligation in the bond, a promise by the party of the first part to pay the in debtedness. It also contains a stipulation that if any default occurs, the party of the second part shall have power to sell the property according to law. To pro tect the borrower the law requires that in order to execute the power of sale conferred on the mortgagee by this covenant, the mortgage be foreclosed. In some jurisdictions the mortgage gives a power of sale without the necessity of resorting to the courts.
The last sentence of this covenant provides that the premises may be sold in one parcel, regardless of any provision of law to the contrary. The lender may corisider the property more valuable since it is held in single ownership, and consequently better security for the loan if it can be sold as one parcel under foreclosure. The general rule of law requires that when the property can be divided into separate lots forming natural divisions, such lots must be of fered for sale separately and only so much of the property sold as will satisfy the claim of the mort gagee. If an owner is being foreclosed by legal ac tion, and he can show the court that it would be a hardship upon him to have the property sold as one tract, the court may grant relief from this stipulation and order the property to be sold in separate parcels. This is usually done with the provision that if this method of sale does not raise enough money to pay off the mortgage, the property may then be offered for sale in one parcel.
12. Insurance to be maintained.—The second cov enant provides that the owner will keep the buildings on the premises insured for the benefit of the mort gagee against loss by fire. Often the buildings are a more important of the security for the loan than the land. Loans on improved property are usually made for a larger proportion of the value of the property and at a lower interest rate than loans on unimproved property. It is therefore extremely im portant that the mortgagee have insurance policies in his possession, protecting him against loss arising thru damage to the buildings by fire. Such policies are made out in the name of the owner, but with a rider attached making any possible loss payable to the mortgagee, as his interest may appear. The original policy is retained by the mortgagee and the owner is furnished with a copy by the insurance com pany.
The latter part of the second covenant provides what shall be done with the insurance money collected by reason of any fire loss. The proceeds may be ap plied by the mortgagee toward the payment of the debt. The money may be paid over to the owner in whole or in part, to enable him to repair the buildings or erect new ones in their place, or it may be used for any other purpose satisfactory to the mortgagee. Payments by insurance companies do not affect the lien of the mortgage for the full amount.