mortgage, in law, device for protecting a creditor by giving him an interest in property of his debtor. In common law a mortgage was a conditional sale; i.e., the mortgagor (debtor) sold realty (real property mortgage) or personal property (chattel mortgage), but if the debtor paid the debt by a certain time the sale was voided. The mortgagee (creditor) held legal title, the mortgagor equitable title; both estates were salable. Today Great Britain and a majority of states in the United States view mortgages as liens on property. The practical result under the two systems is the same. If the mortgagor does not pay the debt, the creditor seeks a court-ordered sale of the property (foreclosure), and the debt is paid out of the proceeds. During economic depressions many jurisdictions enact temporary mortgage moratorium statutes that give courts the discretionary power to refuse to foreclose mortgages. In a reverse mortgage, a homeowner borrows against the value of a house to receive a line of credit or monthly payments. Reverse mortgages are used by elderly homeowners as a way of obtaining cash, and normally the loan is paid off when the homeowner dies (or sells the property).

Government National Mortgage Association: see Federal National Mortgage Association.

Federal National Mortgage Association (FMNA), commonly known as Fannie Mae, a privately owned and operated corporation that is the largest purchaser and guarantor of home mortgages in the country. Headquartered in Washington, D.C., Fannie Mae buys mortgages from such lenders as banks and savings and loans, packages them, and resells them on the open market, thus creating fluidity and lessening lenders' risk. Fannie Mae's creation of this secondary mortgage market enables low- and middle-income individuals and families to obtain mortgages and purchase homes. The corporation was founded (1938) by the federal government to buy and sell mortgages insured by the Federal Housing Administration or guaranteed by the Veterans Administration (now the Veterans Affairs Dept.). Rechartered in 1954, it was privatized in 1968. That year also marked the establishment of a federally owned sister corporation, the Government National Mortgage Association (GNMA), or Ginnie Mae, which is administered by the Dept. of Housing and Urban Development and helps to finance public housing. Fannie Mae's corporate credibility was damaged by revelations (2004) that it manipulated its earnings from 1998 to 2004, in part to maximize bonus payments to its corporate executives.

Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, privately owned, government-sponsored organization that uses private capital to buy home mortgages as a means to help lower housing costs. A sister institution to the Federal National Mortgage Association, as well as a sometime competitor, Freddie Mac aims to foster liquidity, stability, and affordability in the U.S. mortgage market to give Americans the opportunity to afford housing. Chartered by Congress in 1970, it purchases mortgages from a variety of lenders and issues numerous publicly offered securities backed by those mortgages; it also retains some securities in its portfolio. One of the country's biggest buyers of home mortgages, by the early years of the 21st cent. Freddie Mac had provided help to over 46 million families, or approximately one in every six American homes. However, disclosures in 2003 that Freddie Mac had misstated its earnings for 2000-2002 damaged its credibility. The corporation has its headquarters in McLean, Va.

In Anglo-American law, the method by which a debtor (mortgagor) conveys an interest in property to a creditor (mortgagee) as security for the payment of a money debt. The modern mortgage has its roots in medieval Europe. Originally, the mortgagor gave the mortgagee ownership of the land on the condition that the mortgagee would return it once the mortgagor's debt was paid off. Over time, it became the practice to let the mortgagor remain in possession of the land; it then became the mortgagor's right to remain in possession of the land so long as there was no default on the debt.

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