Nationwide Mortgage Licensing System (NMLS) Practice Exam

In a mortgage agreement, which entity is the borrower referred to?

1. Mortgagor

2. Mortgagee

3. Guarantor

4. Loan officer

The correct answer is: Mortgagor

In a mortgage agreement, the borrower is referred to as the mortgagor. The mortgagor is the individual or entity that takes out a loan to buy property and pledges the property as collateral to secure that loan. By entering into this agreement, the mortgagor receives the funds necessary to purchase the property while providing the lender with a legal claim to the property until the mortgage is repaid in full. The other terms have specific meanings within the context of a mortgage that help clarify the parties involved in the transaction. The mortgagee, for instance, is the lender who gives the loan to the borrower and holds the security interest in the property. The guarantor is someone who agrees to be responsible for the loan in case the borrower defaults but is not the primary borrower. A loan officer is an individual who works for a lender and assists the borrower in the loan application process but does not have a financial interest in the mortgage agreement itself. Understanding these distinctions is crucial for comprehending the roles and responsibilities of each party in a mortgage transaction.