Some words just aren't worth the trouble, especially not on the fly. Let's not even go there – except when we have to.
Mortgagor and mortgagee are a pair of words that fall into this category. Having to deal with these two is like knowing two siblings whom you see only occasionally and not being able to remember which of them was involved in a messy divorce a while back. You wish you could keep them straight because it would make a difference in the small talk you make at the annual luncheon or wherever you see them.
If you've been paying any attention at all to the real estate crisis, you probably don't exactly smile at the word mortgage. Does it get to be any more fun if you realize that the word derives from a couple of French words meaning "dead pledge"? The idea, evidently, is that if you die, you no longer have to keep paying (although that concept is evidently under fire, if the reports of two-generation 90-year mortgages in Japan are true).
People commonly speak of "getting a mortgage" from a bank or thrift, but that's really short for "getting a mortgage loan." The property owner gives a mortgage and thus is the mortgagor. The bank or other lender is the mortgagee.
I suspect that when people get these two backward, it's because they're misapplying the model of employer/employee. The employer (large capitalist entity) employs the employee, who may be variously construed as the individual, the consumer, the "little guy," or even the oppressed laborer, who has nothing to lose but his chains. The verb employ itself has some interesting baggage – it derives from the notion of someone being "folded in" to an enterprise, even "entangled" or "implicated," with all that means.
In the mortgage transaction, the lending institution, however big and powerful it may be, is on the receiving end. The property owner is the mortgagor – the actor – who is doing the pledging. In a sentence like, "He mortgaged his house to fund his new business," people naturally get it right.
It's odd that mortgagor, with the "or" ending that misleadingly suggests the second "g" is hard, has established itself as the primary form, with mortgager as a variant. As I've looked into this, I've been interested to note how many dictionaries – Merriam Webster, for one – show mortgagor with the stress on the third syllable – perhaps a way to emphasize the "or" spelling. (Similarly, some people pronounce comptroller with the stress on the first syllable, all the better to distinguish from controller, although the two are essentially the same word.)
"No little shack do you share with me, We do not flee from the mortgagee, Nary a care in the world have we; How can love survive?"
Those lines are from a song from the "The Sound of Music," and they're the real reason I feel confident opining on all this, never mind how many dictionaries and real estate sources I've dipped into as I've been writing. The song is the number the Baroness sings with the Captain: two millionaires' ironic lament that because they don't have any real hardships to struggle against, their love is unlikely to last. I have that second line, with its internal rhyme, etched in my consciousness because I grew up with the original cast album from the stage version of the show. The song didn't make it into the film version, with Julie Andrews. If it had, there would presumably be less confusion between mortgagor and mortgagee today.