Definition of "Obligor"
The definition of obligor is a position that comes from obligation and indicates a party that has ‘promised’ to perform a specific act. In the financing world, an obligor is also known as a debtor. It can apply to someone who is obliged legally or through a contract to pay a debt, to provide a service, to transfer a title, or provide benefit to another.
The meaning of the term “obligor” is used in financial context to refer to an issuer of a bond. The bond issuer is contractually obliged to meet the required repayments and interest payments for an outstanding debt. The one who receives the compensation or benefits is the obligee.
How does an obligor work?
As mentioned above, an obligor’s position comes with an obligation that legally bounds the obligor to the obligee. The most common types of obligors are debt holders. The obligor is required contractually to repay their debt and to repay interest. Obligors can be found in corporate settings or personal settings. We’ll take a look at their obligations in each situation.
Corporate Setting Obligor
In the corporate world, an obligor doesn’t only deal with the payment requirements, but also with covenants which can be affirmative or negative. The affirmative covenant is a requirement of the obligor, like meeting a target or benchmark in performance. The negative covenant is a restriction that limits the obligor’s ability to do something, like changing the structure of a company’s leadership.
Because obligors are contractually obliged by these covenants, they have little freedom from them regarding payments. A delay in payments can have long-term repercussions and can be seen as a default for the bond issuer.
Personal Setting Obligor
A person can become an obligor in their personal life as well. In family disputes, divorce affects real estate, but there are situations when the court issues an order that obliges one of the parents to pay a monthly fee in child support so that the other parent can use it to raise the children. This would make the paying parent an obligor. A personal setting obligor can request a recalculation of the child support if their financial status changes as child support result from the obligor’s salary.
In case the obligor loses their job, and they do not request a recalculation of child support, they can face other problems. The court can impose wage garnishments and loss of driver’s license, amongst other things.
When an insurance company has a life insurance policy, and the insured individual dies, the insurance company becomes the obligor. Through the life insurance policy the insurance company is contractually obliged to compensate the beneficiary of the life insurance policy as stipulated within the policy itself.
Real Estate Tips:
We at RealEstateAgent.com feel it is our obligation to pass good real estate knowledge forward, so free feel to use our real estate glossary terms.
And contact a real estate agent; they’re the obligor when it comes to responsible services for people buying or selling a home!
Popular Real Estate Terms
Housing whose rental payments are reduced because of aid granted by the federal, state, or local governments, private enterprises, or individuals. For example, monthly rental payments for ...
Branching is a widespread phenomenon in banking and other financial domains. A branch office defines an office or business bureau that a company opened in another location to provide ...
Supervisor of the operation of apartments while residing in one of the apartments. Some responsibilities include showing vacant apartment to prospective tenants and assuring that the ...
Formal, written, unconditional promise to pay on demand or at a future date a definite sum of money. The person signing the note and promising to pay is called the maker of the note. The ...
Database program that has real estate listings including property photographs. Real estate computer software allows real estate agents and brokers to search for a particular listing by ...
Economic principle determining the market prices of goods, services, and property. The principle states there is a pricing relationship between supply and demand for real property. Economic ...
Depository institution, such as mutual savings banks. If organized as mutual associations, depositors are shareholders, They offer mortgages. ...
The definition of real estate owned (REO) is known by heart by house flippers or by real estate agents specialized in bank owned properties. These are properties that once used to be in a ...
Amount the taxpayer gets back when he or she files the tax return at the end of the reporting year because taxes were overpaid for that year. The tax overpayment equals the tax payments ...
Have a question or comment?
We're here to help.