Mortgages

A mortgage is a transfer of an interest in property to secure a debt. Historically a mortgage was viewed as a transfer of title, so that the lender was granted a present right to possess the property, until the debt was repaid. The modern view is that a mortgage is a lien, in other words, a non-possessory property interest. However even under the lien theory, the mortgage document may grant the lender/mortgagee the right to take possession of the property, including the right to collect any rents from tenants, if the mortgagor defaults on the debt. 

Even if the mortgagor/borrower defaults on the debt, they have the right to redeem the property by paying the debt, at any time prior to a foreclosure. Foreclosure is accomplished by public sale of the property. About half of the states are judicial foreclosure states. They require the mortgagee to sue the mortgagor and obtain a court judgment in order to conduct a foreclosure sale. In nonjudicial foreclosure states, the mortgagee simply instructs a trustee to conduct a public sale of the property after notice to the mortgagor/owner and the public. 

When there is more than one mortgage on a property, priority among mortgagees is determined based on the recording acts. Generally, a later recorded mortgage without notice will have priority over a prior, unrecorded mortgage. The proceeds of a foreclosure sale after the sale costs are paid first to the foreclosing mortgagee, then to junior mortgagees and lienholders, and finally any surplus is returned to the mortgagor. If the mortgage being foreclosed is junior to one or more other mortgages on the property, the foreclosure sale does not divest the senior mortgage(s) and the foreclosure sale buyer will take the property subject to senior mortgage(s).