Mortgagee: Definition, responsibilities and more

As you travel down the road toward homeownership, you may come across a few phrases you find unfamiliar — it's no secret that complex processes like buying a home sometimes come with language that can feel a little perplexing. The good news is that learning mortgage terms is something you can start on right now. For example, "mortgagee" is a term you're likely to come across quite a bit as you navigate the waters of financing a home. Let's explore the term mortgagee and see how that may be used across your mortgage documents.

Mortgagee definition

The term mortgagee refers to the lender that provides a borrower with the funds needed to purchase a home. The lender may be a bank, credit union or any other trusted financial institution that provides home lending services.

Mortgagor vs. mortgagee

There is a distinct difference between a mortgagor and a mortgagee. The mortgagor is the borrower. They're the ones applying for a home loan in the hopes of securing financing and making a home purchase.

As mentioned earlier, the mortgagee is the lender. Assuming the borrower's loan application is approved, the mortgagee is the one providing the mortgagor (the borrower) with the funds to finance their home purchase.

Mortgagor vs. mortgagee responsibilities

The mortgagor is the borrower. As such, they're responsible for shopping around for a loan, obtaining a preapproval letter, finding their dream home and, finally, gathering the necessary paperwork to officially apply for their loan.

Mortgagee responsibilities

The mortgagee has different responsibilities than the mortgagor. Mortgagees are responsible for:

• Setting and offering mortgage rates: While market rates are largely influenced by the economy and housing market as it stands overall, the mortgagee is responsible for taking all factors (the federal funds rate, supply and demand) into consideration and setting the mortgage rates for their loan products. The rate a mortgagor pays will also depend on their personal financial circumstances.
• Originating and issuing mortgages: The mortgagee has underwriters who are responsible for collecting applications, reviewing information, determining whether someone's loan will be accepted and finalizing the specific terms for each mortgagor's (or borrower's) contract.
• Drafting liens: A lien is a legal claim to someone's property. With mortgages, a lien is put on the mortgagor's home until the mortgage is paid off. If the mortgagor defaults on their mortgage, the mortgagee may take action on the lien.
• Selling or foreclosing on seized homes: If the mortgagor defaults and the mortgagee officially seizes and forecloses the home, they are responsible for what happens to this asset. This may result in the mortgagee reselling the property to try to recoup their losses.

In summary

A mortgagee is the lender who provides your home loan. The mortgagee is the responsible for originating and issuing the home loan to the mortgagor, also known as the borrower. If you're looking to secure a loan, you would be the mortgagor and approach a mortgagee for a loan product. Understanding the difference between a mortgagee and mortgagor may help you make more sense of the paperwork as you continue on your journey to homeownership.