An Equitable Mortgage has the same effect as a perfected legal mortgage except in two respects. Firstly, being an equitable right, it will be extinguished by a bonafide purchaser for value who did not have notice of the mortgage.
Secondly, because the legal title to the mortgaged property is not actually mentioned in the secured party, it means that a necessary additional step is imposed in relation to the exercise of remedies such as foreclosure. In this mortgage all kinds of property, real or personal, which are capable of an absolute sale, may be the subject of a mortgage, rights in remainder and reversion, franchises, and choses in action, may, therefore, be mortgaged.
But in cases where there is a mere possibility or expectancy, as that of an heir, cannot be mortgaged. An Equitable Mortgage of lands is one where the mortgagor does not convey regularly the land, but does some act by which he manifests his determination to bind the same for the security of a debt he owes. An agreement in writing to transfer an estate as a security for the repayment of a sum of money borrowed, or even a deposit of title deeds, and a verbal agreement, will have the same effect of creating this Mortgage.
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