There is a common trope among people who have secured a debt that, until the debt is cleared, they never truly own their property. For example, the bank owns the mortgage, and if the mortgage payments are not made, the bank can foreclose on the house. The trope is that a “settlement” type of loan means that the bank actually owns the home, not the person who bought it using the mortgage. Despite how common this trope is, it’s wrong. Misunderstands the legal nature of ownership.
Land ownership comes with certain rights. The owner has the right to exclude: he can reasonably prevent others from using his property without his permission. The owner has the right to use (or not use) his property; they may enjoy (or not enjoy) the property as they see fit. The owner has the right to dispose of the property: he may sell it, transfer it, or otherwise give up ownership of the property at will. In addition, the owner can enjoy the fruits of the property (including disposal) as they wish. In short, the owner exercises authority over the property.
However, that control is not perfect. Ownership also comes with responsibilities. A person may not use his property to interfere with the legal rights of another person; I can’t use my car to damage someone else’s house. The owner is responsible for the safety of people on their premises. And they are responsible for keeping their property.
There is a comprehensive law relating to these rights and obligations. A broader view of property law is beyond the scope of this piece. Instead, we will focus on these unique aspects of identity.
With the basics out of the way, let’s get back to the question of this post: does the owner of the mortgage loan own the property being used as collateral?
We can examine this question with a loan example, but the concept here applies to any collateralized loan. Does the bank own the home it holds the mortgage for? With the unique characteristics of property ownership, we can clearly see that the answer to these questions is “no.” We recognize that no proprietary rights or obligations apply to the bank.
First, the bank does not have the right to evict anyone from the property. If a person decides to have friends, the bank has no say. And the bank can’t set restrictions the way a homeowner can. If the resident argues and prevents someone from their property, the bank cannot cancel it. Of course, the bank does not need to be consulted in any issues related to issuance/deposit; they just don’t have that right. Therefore, we can skip “right to remove” from the list.
Second, the bank does not have the right to use the property; The banker can’t call the owner and say “I need a house for a party this weekend. I’m using yours since I own your house.” And they cannot enforce non-use by other means; the bank cannot prevent the owner from having parties on weekends. The bank has no right to use the property because they have a loan.
The third right mentioned above, annulment, is where the confusion begins. The bank it does they have a limited right to refuse. If a person does not pay the mortgage, the bank may take the house and sell it to collect the debt. But the important factors here are that the right to discard is limited and the claim is bound to agreementnot property. The bank can only take the house and foreclose if the owner fails to fulfill his end of the contract (ie, paying the mortgage). In other words, that right is limited to the owner’s non-performance. The bank may not wake up one day and decide to sell the house; they just don’t have that right. Also, if the house is sold, the bank is entitled to the profit. They can only get what is owed to them. What the bank has transferred to the mortgage customer is money, not household consumption; that was definitely not for the bank to give.
Note also that the limited right of rescission is contractual. In order to persuade the bank to provide a loan, the (prospective) owner must provide himself one of his rightsthat right of disposal. But the (future) owner retains the absolute right to dispose. Also, the destruction of the house it is uncomfortable the holder of their obligation to the bank. Transfer of property rights in property. They are planted in that place, not people.
And the bank does not face any ownership obligations. The bank is not obliged to maintain it; if the roof is damaged by the storm, the bank will not pay you. If the property harms someone, the bank did not face threats; the owner is responsible for those legal obligations.
The bank this is not the case the owner of the house. They do not have the rights or obligations of the owner. What is the bank it does what you own is a mortgage (contract). That contract entitles the bank to certain rights and obligations, as does the other party (the homeowner) who signed it. But that loan is not the ownership of the house itself.
We can extend the concept of property ownership here to areas beyond collateralized loans.
Another common trope is that since a person has to pay property taxes and the property can be seized if they don’t, that person never really owns their house. But using the same logic described in this post, we can see this trope is equally wrong. Also, the government has no ownership rights or obligations. Governments have unique powers and limited rights, however. Governments can compel certain uses (eg, easements) or non-uses (nuisance), enter property without permission (warranty search), and take property (eminent domain) but those rights are also limited. They are limited by law (for example constitutional limits on government power), due process, and often require compensation by the government.
In the case of taxes, such as mortgages, the government can only seize property following the default of an obligation (in this case, paying property taxes). It is a limited right. And, like a loan, the government can’t make a profit from the foreclosure (see Tyler v. Hennepin County. Chief Justice Roberts’ point in his opinion that this principle goes back to the Magna Carta is also a directive).
We may combine certain proprietary features to make better deals. But just because we dismantle one part of it doesn’t mean that a lot of rights disappear.
