From an accountant's standpoint, the term "mortgage" may be defined as the pledging of property, frequently real estate, as security for the repayment of a specified sum of money at a specified time, together with interest thereon calculated at a specified rate and payable at a specified time and place. If the condition be complied with by the maker of the mortgage - the mortgagor - the pledge becomes void.
The forms of mortgages and the laws governing them vary so greatly in the various states that only such general features of mortgages can be considered here as bear directly on accounts. As a rule, the form of a mortgage is that of a deed conveying the fee simple, but there is always preserved to the mortgagor an "equity of redemption"; and before considering mortgaged land as having become the property of the mortgagee, the accountant must satisfy himself that this equity of redemption has in some legal manner been foreclosed, forfeited, cancelled, or surrendered. This is usually all that an accountant need ascertain on this question, for matters beyond this belong rather to the legal than to the accounting profession. An outline of the entries necessary to bring mortgages into the accounts is given in Chapters XII and XIII.
Minor modifications in the form of a mortgage may appear, according to the ideas of the attorney drawing the document. None of these modifications affect the accountant, whose principal interest is centered upon the debt which is secured by a mortgage and which represents the consideration to be shown on the books of account.
In order to perform his duties properly, however, an auditor must be familiar with the general and local requirements governing the particular mortgage which he is examining, and he should be able to say whether or not the legal requirements have been complied with.
The principal legal requirements may be stated as follows:
1. The correct description of the mortgagor as to name, residence, and civil condition.
2. The proper description of the mortgagee.
3. The proper insertion of dates wherever necessary.
4. An accurate and sufficient description of the property covered.
5. The witnessing and the execution of the document in accordance with statutory requirements.
6. The proper recording of the document when that is necessary.
7. An examination of the notes accompanying the mortgage, to see that they are properly dated and executed and conform to the body of the mortgage.