When a mortgage loan is made to a consumer, the bank or loan institution is the mortgagee, while the consumer is the mortgagor.
Mortgages are long term loans secured by the real property of the individual borrowing the money, and they are generally used for homes, called home mortgages. The lending institution, which might be a bank or a mortgage company, is the mortgagee, lending money to the homebuyer, who is the mortgagor.
The home is subject to forfeit if the mortgage loan repayments are not met by the mortgagor, and the mortgagee holds a lien on the property to that effect. Liens are documents stating that the property belongs to the lender to the extent that a loan needs to be repaid.
Mortgage loans consist of principal repayments as well as interest repayments which are added to the principal amount at rates that depend on the amount being borrowed, the term length of the loan, and the creditworthiness of the mortgagor.
Mortgagees must perform thorough underwriting to ensure that their loan has a high probability of being repaid, and this includes backgrounds checks and possibly interviews with references for the mortgagor. Bad home loans were the main cause of the subprime mortgage housing bubble, or meltdown, of 2008.
Many mortgagees had their loans purchased from them by federal programs which meant that the risk of nonpayment was shifted to Fannie Mae and Freddie Mac. Since then new regulations for underwriting exist in an attempt to prevent that from happening again.
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