Blanket Mortgage

A mortgage secured by several properties or a number of lots. A blanket mortgage is often used to secure construction financing for proposed subdivisions or condominium development projects. The developer normally seeks to have a “partial release” clause inserted in the mortgage in order to obtain a release from the blanket mortgage for each lot as it is sold, according to a specified release schedule. For example, if a developer obtains a $500,000 mortgage to cover the development of 50 lots, he might be required to pay off $12,500 of principal to get each lot released from under the blanket mortgage. Sometimes, land developers have a “special recognition” clause put in the blanket mortgage whereby the lender agrees to recognize the rights of each individual parcel owner, even if the developer defaults and there is a foreclosure. Occasionally, the federal government secures a blanket lien against all properties owned by persons who have defaulted on their income taxes. 

A blanket mortgage may also be used when a purchaser buys a house plus an adjacent vacant lot and finances the purchase with a single mortgage that covers both properties. It may also be used where the equity in one property is insufficient to meet the lender’s requirements.