What characterizes an equitable mortgage?

• A. An agreement to mortgage without any deed
• B. Parties intend to mortgage and deliver an absolute deed
• C. A recorded mortgage with a title company
• D. A lease with option to purchase

Answer: (B)

Equitable mortgage is created when someone deposits title to the property with the lender (or there is an agreement to mortgage) with the understanding that the deed is a security for a loan, not a transfer of ownership. The key is the intent to mortgage coupled with delivering the title as security, even if no formal mortgage deed is executed. Delivering an absolute deed to secure the debt expresses that exact arrangement—the title is held as security for the loan, and reconstruction of ownership occurs only if the debt is not repaid. This is why describing it as parties intending to mortgage and delivering an absolute deed best captures how an equitable mortgage arises and is enforceable in equity. The other scenarios describe different arrangements (no deed, a typical legal mortgage, or a lease-option) and do not fit the concept of an equitable mortgage.