WHAT IS A MORTGAGE?

When real property is purchased, some or all of the purchase price is usually borrowed from a bank or other lender. In virtually all cases, when a lender makes a real estate loan the loan will be secured by a lien against the real property. That means that, if the buyer-borrower does not make the required payments under the loan, the lender may take title to the property away from the buyer-borrower through some type of foreclosure process.

In most of the United States, the lien that gives the lender the right to foreclose upon the property, if the debt is not paid, is called a “mortgage.” The word “mortgage” is routinely used in California, but it is usually technically inaccurate. In California, most real property transactions involve deeds of trust, not mortgages.

“Mortgage” for California law purposes is defined by Civil Code Section 2920(a) as “a contract by which specific property, including an estate for years in real property, is hypothecated for the performance of an act, without the necessity of a change of possession.”

In somewhat simpler English, this means a contract by which real property is put up as collateral to secure the doing of some act – usually paying a debt. Under some very old laws, to put up collateral, you had to surrender possession to the lender. Civil Code Section 2920 makes it clear that it is not necessary to a mortgage that the lender take possession.

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