If you live in Illinois you know that the Economy has been sputtering: struggling valiantly but with little to show for it. Case in point: Is your home still underwater? For most people the answer is still yes – even as markets around the country rebound. So today we address a deceptively simple question: What is a mortgage and how does it work? Why don’t mortgages relate to the value of our homes? Here are a few things to consider: a mortgage is a loan secured by real estate. While the term “mortgage” is used colloquially to refer to both the loan and the security, there are actually 2 separate legal documents at work here: a Note and a security instrument – the Mortgage lien.
Note: When money is borrowed to purchase real estate, some States title the underlying property in the name of the Lender and permit that interest to hypothetically transfer over time to the Borrower. The arrangement is a bit like lay-a-way. These States are using the “Title Theory.” But Illinois, like many other States, places the underling property in the name of the homeowner and gives the Lender a lien on the owner’s interest – these States are using the “Lien Theory.”