Mortgages - Problems in Possession, Rents, and Mortgagee Liability

DePaul Law Review, May 2015

By Robert Kratovil, Published on 11/01/61

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Mortgages - Problems in Possession, Rents, and Mortgagee Liability

Mortgages - Problems in Possession, Rents, and Mortgagee Liability Robert Kratovil 0 1 Recommended Citation 0 Robert Kratovil, Mortgages - Problems in Possession , Rents, and Mortgagee Liability, 11 DePaul L. Rev. 1 (1961) Available at: https://via.library.depaul.edu/law-review/vol11/iss1/2 1 Thi s Article is brought to you for free and open access by the College of Law at Via Sapientiae. It has been accepted for inclusion in DePaul Law Review by an authorized editor of Via Sapientiae. For more information , please contact Volume XI Number 1 MORTGAGES-PROBLEMS IN POSSESSION, RENTS, AND MORTGAGEE LIABILITY HE HISTORY of mortgage law is the history of hundreds of years of ceaseless struggle for advantage between borrowers and lenders, and the lawbooks reflect the constantly shifting fortunes of this war. Occasionally the battle has gone in favor of the lenders. More recently the battle has usually gone in favor of the borrowers, and many laws favorable to the borrowers have been passed. To understand how the modem mortgage developed out of these centuries of struggle is to take a long step forward toward understanding modem mortgage law. Much of our mortgage law comes to us from England. In that country, mortgage arrangements of various kinds existed even in the Anglo-Saxon times before the conquest of England by William the Conqueror in 1066 A.D. However, it will suffice for our purposes to begin with the mortgage of the 14th century. This document was a simple deed of the land, running from the borrower, (mortgagor) to the lender (mortgagee). All the ceremonies needed for a full transfer of ownership took place when the mortgage was made. The mortgagee became the owner of the land, just as if a sale had taken place. However, this ownership was subject to two qualifications: 1. The mortgagee, as owner, could and often did oust the mortgagor and take immediate possession of the property and collect the rents. However, it was necessary that the rents so collected be ap MR. KRATOVIL, author of the book, REAL ESTATE LAW, currently in its third edition, was formerly an instructor of Real Property and Mortgage Law in the De Paul University College of Law, and presently is an instructorin these subjects at the American Savings and Loan Institute. The present article was originally a lecture presented by Mr. Kratovil before the School of MortgageBanking in June, 1961. plied on the mortgage debt. For this reason, the mortgagee often permitted the mortgagor to remain in possession. 2. The mortgage described the debt it secured and stated a date of payment known as the law day. The mortgage gave the mortgagor the right to pay the debt on the law day. If he did so, the mortgage provided that it was thereby to become void. This provision was known as the defeasance clause, for payment of the debt on the law day defeated the mortgage and put ownership back in the mortgagor. In early times, the courts enforced the mortgage as it was written. Foreclosure proceedings were not necessary and did not even exist. Failure to pay the mortgage debt when due, termed a default, extinguished all the mortgagor's interest in the land. For many years no one dreamed of questioning this scheme of things. Then, slowly at first, and later in greater numbers, borrowers who had lost their property through default began to seek the assistance of the king. A typical petition addressed to the king by such a borrower would set forth the borrowing of the money, the making of the mortgage, the default in payment, and the resulting loss of the land. The petition would continue with the statement that the borrower now had funds and offered to pay the mortgage debt in full, with interest. The petition would then ask or pray that the king order the mortgagee, who now owned the land, to accept the proffered money and to convey the land back to the borrower. The king had little time or inclination to tend to these petitions personally, and so he habitually referred them to a high official, the Lord Chancellor. Since the king was the fountain of all justice, it was the Chancellor's duty to dispose of these petitions justly and equitably, according to good conscience, and this he did. In cases of hardship or accident, for example, where the mortgagor had been robbed while on his way to pay the debt, the Chancellor would order the mortgagee to accept payment of the debt from the borrower and to convey the land back to the borrower. A mortgagee who refused to do as he was told was sent to jail. In time, by about the year 1625, what had begun as a matter of grace on the part of the king had developed into the purest routine. Borrowers filed their petitions directly with the Chancellor, who was now functioning as the judge of a court, instead of with the king, and with routine regularity his order issued, commanding the mortgagee to convey. Thus a new and very important right was born, the right of the mortgagor to pay his debt even after default, and (...truncated)


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Robert Kratovil. Mortgages - Problems in Possession, Rents, and Mortgagee Liability, DePaul Law Review, 2015, Volume 11, Issue 1,