11. Mortgages

The parties are the mortgagor, who borrows, and the mortgagee, who lends. There may be later lenders, a surety, and a purchaser of the equity of redemption. Two statutes to read with this topic: The Home Mortgage Finance Act, 2009, which regulates home mortgage finance, and the Conveyancing and Law of Property Act 1881, one of the English statutes adopted in Sierra Leone.

A mortgage by demise grants the lender a long lease, usually three thousand years, with a proviso for cesser on redemption. The borrower keeps the fee simple. A mortgage by legal charge does not pass an estate. It charges the land with the debt. An equitable mortgage arises where the borrower has only an equitable interest, or where the formalities for a legal mortgage are missing but equity will treat the agreement as a contract to create one. Deposit of title deeds, with an intention to secure a debt, is the old equitable mortgage.

The equity of redemption is the borrower's right to get the land back on payment of what is due. Equity will not allow a clog on that right. A term that says the property is the lender's if the borrower defaults, with no right to redeem, is looked at with suspicion. The right to redeem can be postponed. It cannot be destroyed by a trick in the deed.

Foreclosure is the lender's suit to extinguish the equity of redemption after default. The court gives the borrower a further time to pay. If that passes, foreclosure absolute vests the land in the lender, and the debt is treated as satisfied. Sale, and the appointment of a receiver, are the remedies a well-drawn mortgage also reserves. Non-recourse lending limits the lender to the security. The borrower is not sued on a personal covenant for the shortfall.

An assignment of the mortgage transfers the lender's security. The borrower should be told, so that payment is made to the right person. The debt and the security go together. A transfer of one without the other is a drafting mistake.

In a conveyance, a legal mortgage is capable of being a good root of title, and a paid-off mortgage still belongs in the abstract, with the receipt endorsed on it.