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Equitable Mortgage

Mortgage is the transfer of title of a property to a creditor to be as collateral for the performance of a particular act mostly payment of money borrowed. Once the performance of the act is complete and satisfactory, the creditor agrees to convey back the property to the rightful owner. Mortgages are of various types as they deal with the type of property mortgaged hence can be mortgages of tenements, mortgages of land, mortgages of chattels and goods, and mortgages of hereditaments, since they affect the title of what is being mortgaged they can be either legal or equitable.

Equitable mortgages are a type of security interest in that although they do not fit the decisive factor for legal mortgage, they are considered mortgages taken under equity. The equities are taken under the interests of justice wherein money was lent by the creditor upon which the borrower promised security in return. As such, in an equitable mortgage, the lender gets security by taking possession of the original title documents of the collateral property in question. The borrower is expected by law to sign a Memorandum of Deposit of Title Deed (MODTD). The document acts as proof that the borrower has deposited the title documents with the lender with his own will for the sake of securing the financing offered by the bank.

Equitable mortgages thus give the lender the right to foreclose on the property for purposes of selling it or appointing a receiver in cases of non-payment. An equitable mortgage can come into being in two different ways – by a legal mortgage that was never completed by transference of the underlying asset or by creating a mortgage from the beginning as an equitable mortgage.

It’s therefore right to say that an equitable mortgage is the kind of mortgage that doesn’t fulfill the requirements of an officially authorized credit financing against collateral, but nonetheless becomes effective through an agreement to generate a legal mortgage or by way of launching an equitable charge that will make the repayment of the credit mandatory. Note that the establishment of an equitable charge will not transfer the custody or ownership rights of the property in question to the creditor; the creditor is entitled to a legal process that will see to it that they recovered the debt in case the borrower defaults to pay.

An equitable mortgage of lands is whereby the borrower doesn’t convey the land, but acts in a manner likely to manifest that he has the determination to bind the land as the collateral for the debt he owes. An agreement made in writing whereby an estate is transferred as security for the repayment of a sum borrowed, a verbal agreement, and a deposit of title deeds, will have the same impact of creating an equitable mortgage. Equitable mortgage therefore is a type of mortgage that provides recovery justice to a loan where the creditor can recover in form of selling or foreclosing the said property.

Tags: bank, collateral, credit, law, Legal, loan, money, mortgage

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