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Property '24 > Ass. 46 - Mortgages/ Foreclosure > Flashcards

Ass. 46 - Mortgages/ Foreclosure Flashcards

1
Q

who is the mortgagor

A

the owner/ borrower

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2
Q

who is the mortgagee

A

the lender

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3
Q

ARM

A

adjustable rate mortgage

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4
Q

balloon payments

A

large payments generally at the end of the mortgage

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5
Q

what are the 2 parts of a mortgage?

A
  • promissory note
  • mortgage deed
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6
Q

promissory note

A

contract establishing the debt

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7
Q

mortgage deed

A

establishes the debt w the property as collateral

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8
Q

mortgage definition

A

the conveyance of an interest in real property as security for the performance of an obligation
- obligation is almost always a loan of money evidenced by the promissory note

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9
Q

lien theory

A
  • mortgage is seen as only a lien on the property
  • lender merely holds a security interest in property not title, therefore not entitled to property unless foreclosed
  • 2/3 of states follow
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10
Q

title theory

A
  • theory that the mortgage is the transfer of title to the mortgagee (lender) until the debt is repaid
  • mortgagee has the theoretical right to take possession of the secured property - and thus obtain its rents and profits - w/o foreclosure
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11
Q

what does the promissory note contain?

A
  • identifies the borrower and lender
  • contains borrowers promise to repay the loan on stated terms and conditions
  • recites that its repayment is secured by mortgage
  • is signed by borrower
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12
Q

4 key components of promissory note

A
  1. the amount
  2. the interest rate
  3. the term
  4. the amortization schedules
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13
Q

component of prom note: the amount

A

usually limited by the applicable loan to value ratio

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14
Q

component of prom note: interest rate

A
  • may be either fixed
    (remains the same during the entire life of the loan)
  • or an adjustable rate
    (ARM - varies over the life of the loan)
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15
Q

component of prom note: the term

A
  • typical loan has a term of 15, 25, or 30 years
  • loan and interest must be paid by the end of the loan term
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16
Q

component of prom note: amortization schedule

A
  • Specifies the method by which the borrower repays the loan; sets forth the amount and due date for each loan repayment
  • Most fixed-rate residential loans are fully-amortized, requiring a fixed monthly payment over the entire term
17
Q

what are the 2 types of foreclosure?

A
  1. judicial foreclosure
  2. foreclosure by power of sale
18
Q

judicial foreclosure basics

A
  • available in ALL jurisdictions and dominant method in about half of the states
  • specialized type of litigation
  • provided by statute
19
Q

judicial foreclosure process

A
  • lender, as P, begins JF process by filing complaint against the borrower, junior lienholders, and other persons holding interests in the property that are subordinate to the mortgage lender
  • the complaint alleges that a default has occurred and requests that the mortgage be foreclosed in a court-supervised sale
  • the sale does not generate anything close to fair market value
20
Q

judicial foreclosure sale

A
  • Held in public location during normal biz hours and is usually conducted by a court-appointed officials
  • Mortgagor and mortgagee and any member of the public bid at the sale
  • Mortgagee (lender) enjoys an advantage: it can bid w/o case, using instead the unpaid loan balance owed to it (everyone else can only bid cash)
21
Q

foreclosure by power of sale

A
  • Predominates in the other half of states
  • Purely private, w/o judicial involvement
  • Creates the potential for abuse
  • Arises from contract
  • Permitted only when authorized by the express terms of the mortgage
22
Q

ways to default on a mortgage

A
  • Non payment
  • Lack of insurance
  • Fraud/ misrepresentation w regard to mortgage application
  • Failure to keep the property up (waste)
23
Q

equity of redemption

A

the right to redeem by paying the balance of the debt before foreclosure

24
Q

can the equity of redemption be waived?

A
  • borrower can never waive this as a condition to obtain a loan
  • however, may be waived AFTER purchasing by handing the property back to the lender
25
Q

statutory right of redemption

A
  • Allows the mortgagor to buy back the property for the price bid at the foreclosure sale for a designated period (often a year) AFTER foreclosure.
  • Generally allows the mortgagor to remain in possession of the property in the meanwhile
26
Q

deed of trust

A
  • Debtor/notemaker is the “trustor”
  • Trustor gives the deed of trust to 3rd party trustee, who is usually closely connected to lender (lawyer, corp, or officer)
  • In the event of default, the lender instructs the trustee to proceed with foreclosing the deed of trust by sale
27
Q

installment land contract

A
  • The debtor is the purchaser of the land who signs a K w the vendor, agreeing to make regular installment payments until the full k price has been paid
  • At the time the vender gives a deed transferring legal title the purchaser
  • In event of default, K usually contains a forfeiture clause providing that the vendor may cancel the k, retain all money paid to date and retake possession of the land
28
Q

the use of parol evidence

A
  • Courts will always use parol evidence in considering contentions that a purported deed is actually a mortgage
  • In effect, this is an exception to the parol evidence rule
29
Q

presumptions accompanying a deed absolute

A

there is a presumption that documents are what they purport to be

30
Q

how is the priority of claims in foreclosure established?

A

established by the date of recording of the lien

31
Q

order of priority of claims in foreclosure

A
  • costs of foreclosure
  • tax liens
  • 1st mortgage (senior lienholder)
  • 2nd mortgage (junior lienholder)
32
Q

what does Foreclosure of senior lien do?

A

wipes out all junior liens secured by the property
- Debt is still there but no more security
- Does not word the other way around

33
Q

will inadequacy of foreclosure sale price invalidate the sale?

A
  • Normally will not invalidate a sale
  • Will ONLY invalidate if the disparity btwn sale price and fair market value “shocks the conscious” or is “grossly inadequate
34
Q

restatement view of inadequacy of foreclosure sale

A

will be invalidated if the sale price is less than 20% of FMV

35
Q

defects in time of sale

A

if sale is conducted on a different day/hour than specified

36
Q

defects in place of sale

A

normally must take place in county where property is located

37
Q

chilled bidding

A

mortgagee is engaged in irregular conduct that suppressed the bidding (ex. kept from the public)

Property '24 (12 decks)

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