Friday, July 13, 2012

A saying that has bugged me since becoming a homeowner...

"Well, actually the bank owns the house."

And I may be wrong to be bugged by this, because perhaps there's something about real estate contracts that I am genuinely misinformed about.

My understanding is that the bank absolutely does not own my house. I own my house. I hold the title to it and to the land.

I also happen to owe the bank a big wad of money. They own a claim to a stream of money from me. They don't own my house - not one percent of it. If something goes wrong with my payments I of course have other property that they can resort to to guarantee that my debt to the bank is fulfilled. That other property is my house, after all (which I own, not them).

Because of the arrangement made so that I could get the aforementioned big wad of money, I agreed to maintain my house up to a certain standard, and to insure it. But that's because the bank needs me to protect their collateral. It's still my property that I'm maintaining (it wouldn't be very useful as collateral if they owned it, after all!).

Dumb stuff, I know. And I know this is what everyone means when they snidely say "well the bank owns the house".

But damn it, that saying bothers me now whenever I hear it!


  1. It's always interesting to read about other countries' legal systems.

    In Britain my mortgage provider holds the deeds to my flat. They don't own it, but they hold the deeds in case they need to exercise their right to use it as a guarantee.

    However, I'm not required to have home insurance. And I don't have home insurance. In Ireland I would be required to have home insurance. I'm not sure if there's a clause about maintaining the property either.

    I'm not sure if it's legislation that means I don't have to have home insurance or if it's a quirk of my contract.

  2. You live in Virginia, so you signed a Deed of Trust. That means that the second you bought the house you also signed a Deed to the property over to the bank, which they will hold until you satisfy the debt amount. This is different from a mortgage, where you buy the house and own it, but put the house up as collateral until the debt is paid. Functually, these two contracts are very, very similar until it comes to foreclosure, but in very technical terms: no, you do not own the house, the bank does.

    1. AHA! I am wrong to be annoyed by it. Duly noted. Very interesting, thank you. I will check this one off my pet peeve list.

  3. Don't pay your property taxes Daniel and you will see who really owns the house :)

  4. This whole post is based on the premise that there can't be two owners of the same property. I thought you and Gene believed such a position was odd.

    1. You know, I thought of EXACTLY that when I read Gene's post :)

      Still seems strange, though - they acquire the house if I can't pay my mortgage, but what good would that do them if they already owned the house? That's just my non-lawyer brain muddling through it - aaron's explanation above is very helpful.

  5. IIRC, there are actually three ways that mortgages can work. In a "title mortgage" jurisdiction, the bank holds the title to the house and you have (i) a call option to acquire the title by paying off the mortgage, and (ii) a right to occupy the house for free unless evicted. In a "lien mortgage non-recourse" jurisdiction, you own the house and the right to put the house to the bank by mailing it the keys. In a "lien mortgage recourse jurisdiction" (i) you own the house, (ii) the bank owns a lien on you and your wealth, and (iii) the bank has a call option on the house should you fail to keep up your payments.

    No, I don't know what is currently the case where you are No, I am not sure I am correct. I am not now, never have been, and Jeebus willing never will have to teach the law of real property to anybody...


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