Distinction between 'mortgage' and 'hypothecate'

Question

Please help me understand the difference(if any) between 'mortgage'and'hypothecate.

Usenet · Accepted Answer

[nq:1]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
I looked them up in American Heritage Dictionary, and the definitions given sure don't differentiate!
"Hypothecate" is hardly ever used, as far as I'm aware. The practice sure doesn't seem to be useful.
With a mortgage, the property or item owned by the person who is borrowing money (the debtor or mortgagor) is signed over to the person who is lending the money (the creditor or mortgagee). Ownership of that property or item changes, although the debtor retains possession while he pays off the debt. If he fails to make a payment, the creditor can throw the debtor off the property or take the item away.

Hypothecation does not include that signing over.
Maybe a lawyer understands.
Cece

Usenet · Answer

Cece typed thus:
[nq:2]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
[nq:1]I looked them up in American Heritage Dictionary, and the definitions given sure don't differentiate! "Hypothecate" is hardly ever used, ... creditor can throw the debtor off the property or take the item away. Hypothecation does not include that signing over.[/nq]
Hypothecation is used in UK English for something different - the ring fencing of specific income for a specific purpose, usually by government with tax revenues.

David
==

Usenet · Answer

[nq:1]Cece typed thus:[/nq]
[nq:2]I looked them up in American Heritage Dictionary, and the ... the item away. Hypothecation does not include that signing over.[/nq]
[nq:1]Hypothecation is used in UK English for something different - the ring fencing of specific income for a specific purpose, usually by government with tax revenues.[/nq]
Presumably from the pledge meaning.
According to OED, it can also mean hypothesise. No recent citations are given but I'm sure that I have come across this usage fairly recently.

Laura
(emulate St. George for email)

Usenet · Answer

[nq:1]Cece typed thus:[/nq]
[nq:2]I looked them up in American Heritage Dictionary, and the ... the item away. Hypothecation does not include that signing over.[/nq]
[nq:1]Hypothecation is used in UK English for something different - the ring fencing of specific income for a specific purpose, usually by government with tax revenues.[/nq]
... a usage which appears to have no justification that I can determine. The plain English "ring-fencing" stands a good chance of supplanting it.

Matti

Usenet · Answer

[nq:2]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
[nq:1]I looked them up in American Heritage Dictionary, and the definitions given sure don't differentiate! "Hypothecate" is hardly ever used, ... creditor can throw the debtor off the property or take the item away. Hypothecation does not include that signing over.[/nq]
A purely hypothecatal distinction.

john

Usenet · Answer

[nq:1]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
The difference is a legal nicety: property that is hypothecated is pledged to a creditor to secure payment of a debt, but title remains with the debtor; property that is mortgaged is conveyed to the creditor, but incidents of ownership remain with the debtor.

Chris Green

Usenet · Answer

[nq:2]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
[nq:1]I looked them up in American Heritage Dictionary, and the definitions given sure don't differentiate! "Hypothecate" is hardly ever used, ... he fails to make a payment, the creditor can throw the debtor off the property or take the item away.[/nq]That's not how it works in the US. With real property, the owner is the borrower is the mortgagor. The lender is the mortgagee and holds a note from the mortgagee secured by the mortgage on the premises. The relevant documents are the note, which evidences the debt, the mortgage, which makes the real property security for the debt, and the deed, which conveys title to the owner, who is the borrower, who is the mortgagor.

If the mortgagor fails to make payment when due, the mortgagee may foreclose. Foreclosure is a judicial proceeding and requires that suit be brought in court. If the borrower still doesn't pay, the court will sell the property for the benefit of the lender, pay off the loan plus all costs of ligitation and sale, and in the unlikely event that any money is left pay the balance to the borrower.Here's what I think Cece was thinking of: As a way of getting around the requirement to go to court to foreclose on a mortgage, lawyers developed something called a deed of trust, or trust deed, in which the legal title to the property is conveyed not to the borrower but to some third parties often people in the office of the the lawyer who conducts the settlement who are called trustees for the actualy buyer and are technically the owners. The borrowers get the right of possession, and otherwise the respective positions are the same as with a mortgage.

But if the borrower falls behind, the trustees can sell the property like any other owner, without going to court, and they pay the lender and the borrower as if it were a mortgage foreclosure. Many states chose to protect homeowners and either outlawed trust deeds or said that they were to be treated just like mortgages. Others put lesser restrictions on them. There's a whole national patchwork of laws on the topic.
Hypothecating is simply offering property, real or personal, tangible or in-, as security for a loan.
[nq:1]Hypothecation does not include that signing over. Maybe a lawyer understands.[/nq]
I think I do.

Liebs
AAL

Usenet · Answer

[nq:2]Please help me understand the difference(if any) between 'mortgage'and'hypothecate.[/nq]
[nq:1]The difference is a legal nicety: property that is hypothecated is pledged to a creditor to secure payment of a debt, but title remains with the debtor; property that is mortgaged is conveyed to the creditor, but incidents of ownership remain with the debtor.[/nq]
Most US states are so-called "lien theory" states (including the most populous state in America, California), where, in the case of real estate mortgages, legal title remains with the mortgagor, the mortgagee receiving a lien on the property. In "title theory" states, including New York State (which has the most populous city in America) the mortgagee gets the actual title, which would seem to be the Traditional rule. Or something like that; check with Liebs or Lawyer Smythe. So is "hypothecation" a more accurate word for what's commonly described as "mortgaging" in the lien-theory states?

Distinction between 'mortgage' and 'hypothecate'

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