129. Bond And Mortgage

After the loan has been approved and the prospective borrower advised, he executes a bond and a mortgage. The former is only a sealed conditional note, duly attested by a notary or commissioner of deeds. In former days it was customary to draw the bond for double the amount of the sum to be advanced, but this is rarely done now. Before the bond and mortgage are finally executed, it will be necessary for the company to be assured that the mortgage when made will be a first lien on the premises, and will require that proof of title be furnished. It usually has a lawyer who is familiar with the procedure of making such searches and does the work, charging the borrower a fee. The company is usually willing to have a title guarantee company attend to the investigating of the title of the borrower and so request a title policy equal to the amount to be loaned. This title policy is a very much more convenient and safe way of being assured of its lien.

Mortgage Book

Name...................................................................... Date made..................................

Amount of Mortgage............................................ Building material......................

Rate........................................................................ Present use................................

Time........................................................................ Annual rental............................

Bond of..........................................................................................................................

Location........................................................................................................................

Dimensions of ground..................................................................................................

Dimensions of building................................................................................................

Value..............................................................................................................................

Recorded liber............................Mortgage page..........................at..............................

Interest commences..........................................................Interest days......................

Figure 104a. Mortgage Record.

The company should require the delivery of the unexpired insurance policies and have their interest as mortgagee recorded on the face of the policies. Enough insurance should be carried to protect the company in case of fire.

The laws of the State of New York require that all mortgages and assignments of mortgages be made to the company and recorded. The mortgage should be sent to the county clerk's office by the bank's attorney immediately after execution, and the attorney's receipt therefor filed in an envelope with the bond, the insurance policies and other papers. The number of the mortgage and such other data as may be found desirable should be noted on the outside of the envelope. A good form of mortgage record is shown in Figure 104A on page 215. This book is eleven inches wide and eighteen inches long, thus giving considerably more room for the interest and other records at the bottom.

The Jersey Trust Company

No.........

Bond and Mortgage of

Mortgage Recorded

Assignment Recorded

Underlying Liens: $ Retired $

$ " $ " Release Executed

Guaranteed by

190 190

190 190 190 190 190 190

For $

Appraised at $ (Completed) Approved for 1st Mtge $ (Completed) Title Insurance $ $

$

Fire Insurance $ $ $ $ $ Rate %

Figure 105. Mortgage Record.

Many trust companies have a valuable list of deposits in trust for estates, minors, incompetents and others, which they must keep invested, and they find real estate mortgages an excellent form of investment. It is not always possible to find a mortgage for the exact amount needed to invest the surplus funds in a given trust, so they divide one of their own mortgages between themselves and the estate. These sub-divisions are called participations. It is customary to fill out a printed form or write a letter stating that the company has set aside such and such a portion of a certain mortgage as an investment for the estate and to file this declaration with the papers in connection with the trust, retaining the original mortgage papers in the company's own files. A loose-leaf ledger form with provision for participations is shown in Figure 105 on page 217.

There is very little difference in the machinery of handling a bond and mortgage for investment and loaning on a note secured by a bond and mortgage. In this case the borrower is usually the mortgagee instead of the mortgagor. He holds a mortgage running in his favor and wishes to borrow some money for immediate use. He does not wish to dispose of his investment, so makes a note in favor of the company, pledging the bond and mortgage as collateral. The company must first investigate the property to see if the title is valid and clear, and to ascertain just what kind of lien the mortgage is against the premises. Written evidence should be furnished covering all these facts. The company should demand all insurance policies, if the lien is a first mortgage, and if tempted to loan on a second, should obtain satisfactory evidence that there is plenty of insurance to cover all liens. The mortgagee assigns the mortgage to the company and this assignment should be recorded.

Loans on property owned by the borrower are frequently made in this way. The mortgage, of course, then runs direct to the company. Blanket mortgages are frequently given to protect all the loans a man may have or expects to have with the company.

Actual assignments of the title to the property are sometimes found. In some states, a mortgage is known as a mortgage deed, the actual title to the property being vested in the mortgagee until the note is satisfied.