This section is from the book "Real Property, An Introductory Explanation Of The Law Relating To Land", by Alfred F Topham. Also available from Amazon: The New Law Of Property.
Money can be secured on land without conveying the legal estate to the lender. This does not give the lender any rights against the land at law; but in equity he has always had a charge on .the land. Equitable mortgages are created in three ways.
(1) By Deposit of title Deeds.
A borrows money from his bank and deposits the title deeds of his land with the bank as security. A cannot get his deeds from the bank except by bringing an action in equity claiming specific delivery. It is a maxim of equity that " he who seeks equity must do equity," and therefore equity would not allow A to get back the deeds unless he paid the money to the bank.
Sometimes the mortgagor signs a memorandum promising to give a legal mortgage when called upon.
A deposit of title deeds gives an equitable estate to the mortgagee, because equity "treats as done that which ought to be done" and treats the mortgagee almost in the same way as if the land had been conveyed to him.
(2) By a Charge. - A tenant of land may, by deed or writing, or by will, or sometimes by mere conduct, create a charge on his land without conveying the land to the mortgagee. This creates merely an equitable charge.
(3) By a Second Mortgage. - When a mortgagor has made a legal mortgage of his land, the legal estate has passed to the mortgagee, and the mortgagor has only an equity of redemption. If, therefore, the mortgagor mortgages the same land again to a second mortgagee, and conveys his interest in the land to him, the second mortgagee has only an equitable estate in the land.
An equitable mortgagee has a power to sell and to appoint a receiver if the mortgage was made by deed; he can also foreclose (subject to the rights of any prior mortgagees), but he has no right to take possession of the mortgaged land.