Mortgagor Vs. Mortgagee: What’s The Difference?

hobo_018/GettyImages; Illustration by Hunter Newton/Bankrate

When a home is being purchased with a mortgage, there are two parties involved, the mortgagor and the mortgagee. Here’s what those terms mean and how they apply to you as the borrower.

Who is the mortgagee?

A mortgagee is the lender or financial source that originates a mortgage and provides the funding, whether it’s to help a buyer purchase a home or a homeowner refinance an existing mortgage. You might come across the term in your loan documents and your homeowners insurance policy, specifically in the mortgagee clause.

Examples of mortgagees, or mortgage lenders, include:

As the mortgagee, the lender determines whether the borrower qualifies for the loan — and if so, how much to offer and at what interest rate.

While some mortgagees oversee loan repayments — a responsibility known as servicing — many transfer that job to a loan servicing company. But even when this happens, the lender, not the servicing company, is still considered the mortgagee.

What are the responsibilities of a mortgagee?

The mortgagee’s duties are to:

• Review the borrower’s application and financials, including credit score, income and debt
• Set loan terms
• Underwrite the mortgage loan
• Conduct an appraisal
• Disburse funds
• Service the mortgage (or enlist a third party to do so), including collecting payments and managing escrow accounts
• Ensure compliance with lending regulations

Who is the mortgagor?

A mortgagor is the borrower — the one who takes out a mortgage for a home purchase or refinance.

“The mortgagor is the person, couple or group of people seeking a loan to purchase a home — also known as the buyer, borrower or homeowner,” says Rob Heck, a senior vice president at Morty, an online mortgage broker.

What are the responsibilities of a mortgagor?

The mortgagor is responsible for:

• Repaying the loan on time as stipulated in the closing documents
• Adhering to the terms of the mortgage agreement
• Maintaining and paying for homeowners’ insurance, as well as property taxes and any other required payments, such as mortgage insurance
• Upkeep of the home and property
• Communicating with the mortgagee if payment trouble arises

Mortgagee vs. mortgagor: Key differences

“Here’s an easy way to remember the difference: Words ending in ‘-or’ usually refer to someone giving something, while ‘-ee’ refers to someone receiving it,” says Erica Doyne, Chief Marketing Officer of Cardinal Financial: “The mortgagor is the borrower, the person buying the home, who gives a legal promise, the mortgage, that the lender can claim the home if the loan isn’t repaid. The mortgagee is the lender who receives that legal claim as security.”

How a mortgagor and mortgagee work together

The mortgagee and mortgagor form an important partnership. At the start of this relationship, the mortgagor submits a loan application along with the necessary financial documents. The mortgagee carefully reviews these documents, determines their risk level, then underwrites and funds the loan.

Getting the loan successfully approved is often a two-way street. “For example, say you are a self-employed borrower candidate who lacks tax returns,” says Carl Holman, director of marketing with Foundation Mortgage Corp. “The mortgagee may instead accept 12 to 24 months of personal or business bank statements to help you qualify. The lender can also use specialized underwriting to calculate your income and offer a loan structure that fits your real-world cash flow.”

Once a loan is funded, the two parties remain connected while the mortgagor repays the debt, via consistent monthly payments, management of escrow accounts and customer service. This is a long-term financial partnership — often 30 years — and it’s in both parties’ best interests to be proactive if challenges are identified.

“If, for example, the mortgagor hits a rough patch, they should immediately contact the mortgagee,” says Steven Glick, director of mortgage sales for HomeAbroad. “Both parties can then work together on solutions, like a payment plan that the mortgagor can afford.”