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Previously a mortgage was a conveyance of land which was conditional and of no effect if certain conditions were met. The word mortgage was a legal term in French meaning dead pledge, where the debt was absolute and dependent on its repayment. In the case of real estate, a mortgage debt remained in effect whether or not the mentioned property could produce enough income to repay the debt. Initially, the difficulty was that the lender became the owner of the property and could sell it or refuse to re-convey it.

Soon equity courts worked towards protecting the borrower’s interests. The arrangement was such that the lender was the owner in theory, but in reality he or she had only a few of the practical rights of ownership. Thus, the mortgagor could retain ownership, but the mortgagee’s right over the power of sale and repossession, was duly protected in time. In many countries, like the states that have reformed the nature of mortgages are called lien states.