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UBC Real Estate Licensing Exam > Chapter 7.1: Mortgage Law > Flashcards

Chapter 7.1: Mortgage Law Flashcards

1
Q

A mortgage is an _____________ created by a contract

A

Interest in land

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2
Q

A mortgage is not a _____________!!!

A

Loan (debt)

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3
Q

Rather, a mortgage is _____________ and provides ____________ of a loan (debt)

A

Evidence and security

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4
Q

1) Loan =

2) Mortgage =

A

1) Debt

2) Contract = security

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5
Q

In BC, mortgages are registered as a ___________ against the property

A

Charge

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6
Q

Lenders who hold a mortgage as a charge have an _____________ created by a contract - until you pay it off

A

Interest in land

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7
Q

Obligation repaid = mortgage interest is _______________

A

Discharged

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8
Q

Does a mortgage need to be registered to be effective?

A

Nooooooo! It doesn’t

Still enforceable, just won’t show up on a title search

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9
Q

A mortgage is an _________ that can be sold to an _________

A

Asset

Investor

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10
Q

The borrower is also known as who?

A

The mortgagor

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11
Q

The borrower/mortgagor does what?

A

Obtains a loan from a lender

Grants mortgage as security for a loan

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12
Q

The lender is also known as who?

A

Mortgagee

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13
Q

Lender / mortgagee

A

Provides a loan to borrower

Receives mortgage as security

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14
Q

There are 8 things that take priority over a loan, what are they?

A

1) builder lien act
2) Employment Standards Act
3) Local Government Act / Community Charter
4) Strata property Act
5) Workers Compensation Act
6) Claims under federal Income Tax Act
7) Canada Pension Plan, Employment insurance
8) Act, and Excise Tax Act

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15
Q

1 thing that take priority over a mortgage: Builder lien act

A

Builder lien on the property get paid before mortgages

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16
Q

1 thing that take priority over a mortgage: Employment Standard Act

A

Liens for wages owed by employer

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17
Q

1 thing that take priority over a mortgage: Local Government Act / Community Charter

A

Unpaid property taxes or other municipal fees

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18
Q

1 thing that take priority over a mortgage: Strata Property Act

A

Lien for unpaid strata fees

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19
Q

1 thing that take priority over a mortgage: Workers Compensation Act

A

Lien for unpaid fines or insurance fees

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20
Q

The personal covenant is what?

A

A personal covenant is an individual’s promise to fulfill specific obligations in a contract, such as a mortgage or lease, which holds them personally responsible for those obligations.

A covenant that doesn’t run with land only has personal obligations

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21
Q

What are the 4 mortgagor covenants (aka promises)

A
  • pay all taxes on the land and improvements
  • keep premises in reasonable repair and well maintained
  • pay the debt and interest as scheduled in the contract
  • to insure the property to replacement value
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22
Q

_____________________ are stated in the contract and include examples like: repayment clause, acceleration clause, Omnibus clause, etc

A

Express terms

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23
Q

_________________ are not in the contract (aka not written) and are implied by statute or case law

A

Implied terms

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24
Q

Advances Clause (express term)

A

Gives the lender complete discretion in deciding whether to advance some or all the money secured by the mortgage

Not obligated or a ‘’must”

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25
Q

Guarantor Clause (express term)

A

Used to create a separate person covenant of a 3rd party (guarantor) in addition to the borrower’s personal covenant

In example: add mom or dads name to mortgage

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26
Q

What are the 3 implied terms (not written) in a mortgage

A

1) The Prohibition Against Clogging

2) Stipulations for a Collateral
Advantage

3) The Principle of Good Faith and the Duty of Honest Performance

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27
Q

1) The Prohibition Against Clogging

A

A borrower cannot be prevented by the terms of the mortgage from redeeming his property free from the conditions contained in the mortgage

Immediately makes the contract avoid

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28
Q

2) Stipulations for a Collateral

Advantage

A

A term giving the lender advantages in addition to the principal and interest payments

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29
Q

3) The Principle of Good Faith and the Duty of Honest Performance

A

Parties to a contractor under a duty to act honestly in the performance of their contractual obligations

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30
Q

_________________: The borrower cannot be prevented from redeeming his property once the debt is paid


A

Clogging

Any mortgage that clogs the owners right to redeem is VOID

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31
Q

___________________: borrowers can take their current mortgage to a new property and can maintain their current favourable rate

A

Portability clause

Movable mortgage

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32
Q

What is a quitclaim deed

A

A quitclaim deed is a legal document used to transfer a property owner’s interest to another party without guaranteeing the property’s title. It provides no warranties or protections against any claims or encumbrances on the property.

Now considered illegal in British Columbia

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33
Q

What is a blended rate?

A

Occurs when a borrower takes a new mortgage or refinances and combines it with an existing mortgage. The blended rate reflects a weighted average of the original loan rate and the new loan rate, providing a single, unified interest rate for the combined mortgage amount.

Two rates combine to 1 average for new total amount

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34
Q

Your first mortgage is called what?

A

Legal mortgage

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35
Q

A _________________ transfers legal Title to the property from the owner to the lender

A

1st mortgage / legal mortgage

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36
Q

Your 1st mortgage / legal mortgage has a _____________________, which means what?

A

Contractual right of freedom

Borrower has right to redeem title by repaying loan

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37
Q

Your 1st mortgage also has the ________________

A

Equity of redemption - remaining interest

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38
Q

2nd, 3rd, etc mortgages are called what?

A

Equitable mortgages

Anything beyond a 1st mortgage is considered an equitable mortgage despite its name

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39
Q

A mortgage that isn’t your first may have a name of: mortgage of equity of redemption, which means what!

A

A mortgage that isn’t your first may be called a “mortgage of equity of redemption.” This means it is secured by the borrower’s remaining interest in the property after accounting for the first mortgage. Essentially, it uses the borrower’s equity in the property as collateral. If the borrower defaults, the first mortgage must be paid off first before any proceeds from the sale of the property go to the second mortgage lender.

You default sell house and have 100k left on the first mortgage you pay that then the remaining amount of money will go to the 2nd mortgage

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40
Q

An equitable mortgage may also be called an agreement for sale which is what?

A

An “agreement for sale” is a financing arrangement where the seller retains the title until the buyer fulfills all payment obligations, similar to a mortgage but with the seller holding the title as security.

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41
Q

A 2nd or etc mortgage may also be disguised as a mortgage as a transfer (which is?)

A

A mortgage as a transfer means the borrower gives the lender legal title to the property as security for the loan. The borrower retains possession but must repay the loan to regain full ownership. If the borrower defaults, the lender can take ownership and sell the property to recover the loan amount.

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42
Q

Duplicate certificate

A

A duplicate title is an official copy of the property title. Its purpose regarding mortgages includes preventing any new documents or changes from being registered against the property while the duplicate title is out, ensuring the security of the lender’s interest.

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43
Q

Present equitable mortgage

A

A present equitable mortgage is an agreement where the borrower uses their property as security for a loan, creating an equitable interest for the lender, often by depositing title deeds, with the understanding that a formal mortgage may be granted in the future.

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44
Q

Contractual clauses apply when the borrower ____________________

A

Borrower defaults (failure to fulfill an obligation, especially to repay a loan or appear in a court of law.)

45
Q

If the borrower defaults, it is up to the lender to _______ the ______ in the circumstances

A

Lender to choose the remedy it feels is the most advantageous

46
Q

If the borrower defaults remedy option: acceleration

A

Maturity date of the loan is pushed forward and lender demands to be paid out in full immediately

  • the worst remedy
  • basically told you have 7 days to pay me the loan amount (say $300,000)
47
Q

If the borrower defaults remedy option: omnibus

A

In default of payment, the omnibus remedy allows the lender to make the payment on behalf of the borrower, and the amount of the payment will be added to the loan balance.

*can’t make your $250 monthly payment, I’ll cover it, and add $250 to your loan / mortgage

48
Q

_____________________: this gives the lender complete discretion to choose the most suitable remedy

A

Lenders remedies

49
Q

What is a Reverse Annuity Mortgage (RAM)

A

A reverse annuity mortgage is a loan for homeowners aged 55 or older, allowing them to convert home equity into cash. The lender makes periodic payments to the homeowner, and the loan is repaid when the homeowner sells the home, moves out, or passes away.

50
Q

_______________________: mortgage placed on the whole development and can be released from each individual lot if purchased

A

Interim Blanket Mortgage

*Once unit is bought, it is released from the super package of mortgages

51
Q

What is a Lender “take back” mortgage (LTB)

A

A lender “take back” mortgage, is when the seller of a property finances the buyer by providing a mortgage, essentially acting as the lender. The buyer makes mortgage payments directly to the seller.

Used if buyer can’t get a mortgage from a bank (ex. low credit score)

52
Q

__________________: a borrower will receive a loan and grant a mortgage to a lender for a short period of time while long-term financing is being pursued

A

Bridge Financing

53
Q

There are 2 federal legislations that look over mortgages, what are they?

A

1) criminal act

2) interest act

54
Q

Federal Legislation over mortgages: Criminal Code

A

It is an offence for a person or a corporation to enter into an agreement to receive interest at a criminal rate (over 60%)

55
Q

What is the interest threshold before it is deemed illegal and criminal

A

Interest at 60%

56
Q

Federal Legislation over mortgages: Interest Act

A

If the document does not mention interest, no interest can be charged

If the document requires interest to be paid, but no set amount is listed, it is automatically 5%

57
Q

Section 10 of the Interest Act outlines 3 components, what are they?

A
  1. Prepayment Rights: Borrowers can prepay their mortgage after 5 years from the date of the mortgage with a maximum penalty of 3 months’ interest.
  2. Interest Rate Disclosure: The effective annual interest rate must be disclosed if interest is calculated more frequently than annually.
  3. Limitation on Penalties: Limits on the penalties that can be charged for prepayment of the mortgage after the 5-year period.
58
Q

What is the Prepayment privilege

A

A borrower has a right to prepay all outstanding debt at any time after 5 years from imitation of the mortgage with a 3-month interest penalty

59
Q

Provincial Legislation related to mortgages (act)

A

Business Practices and Consumer Protection Act (BPCPA)

60
Q

What does Business Practices and Consumer Protection Act (BPCPA) do / allow?

A

The court can re-OPEN a mortgage transaction under the Consumer Protection Act if it believes the interest rate is harsh or unconscionable

61
Q

The Business Practices and Consumer Protection Act (BPCPA) allows the borrower the right to _______________________

A

Attack the rate of interest

62
Q

The one Environmental Legislation

A

The Environmental Management Act (EMA)

63
Q

Under The Environmental Management Act (EMA) the lender is NOT liable for 3 things if a site is contaminated if:

A
  1. Participating in Financial Matters: They are not responsible for financing the remediation of the contamination.
  2. Imposing Requirements: They are not responsible for imposing or directing the cleanup requirements.
  3. Environmental Conditions: They are not liable if they insist on certain environmental conditions in their security agreements.
64
Q

Under The Environmental Management Act (EMA), the lender IS liable if a site is contaminated if:

A

1) they exercise control over or impose requirements which cause a site to become contaminated
2) the lender becomes a registered owner of a contaminated property

65
Q

Reminder, a mortgage is an asset that can be sold by an investor to another investor

This is an _____________

A

Assignment!

66
Q

3 people in assignment

A

1) obligor (promissor)
2) assignor
3) assignee (3rd party)

67
Q

The obligor/ promisor (assignment)

A
  • consent is not needed for assignment to start
  • cannot assign the debt (liability)
  • owes money to assignor
68
Q

The Assignor

A
  • original party to the contract

- can assign benefits under a contract

69
Q

The assignee (3rd party)

A
  • receives the rights and obligations under the contract, but wasn’t an original party to the contract
  • can sue to enforce benefits
70
Q

In simple, assignment of a mortgage is what?

A

To transfer over to another

71
Q

A person can assign away benefits under a contract to a third party, without the _____________________

A

Consent of the borrower

*they put themselves in this situation, and if you asked them, they’d obviously say no

72
Q

With assignment of a mortgage, the ________________ can sue to enforce those benefits

A

3rd party (assignee)

73
Q

Reminder, with assignment, what cannot be assigned?

A

Liabilities!!

74
Q

On the law / legal side, there are 2 types of assignment

A

1) statutory

2) equitable

75
Q

Statutory requirements for Assignment include what provisions?

A
  • must be in writing
  • must be for the whole amount
  • a copy / notice must be given to the promisor (aka the loser who ain’t paying his bills)
76
Q

A question about fraudulent misrepresentation with the balance of assignment, just know:

A

Bank A is not liable to bank B

77
Q

What is an assumption of a mortgage?

A

A mortgage that allows a buyer / borrower to assume or take over the responsibilities and liabilities under the mortgage from the seller (original borrower)

*NOTE: original borrower may remain liable

78
Q

___________________: Prevents the mortgage from being assumed by anyone unacceptable to the lender

A

Due on Sale Clause

Allows the lender to collect on all amounts owing under the mortgage,
including prepayment penalties, upon sale of the property

79
Q

____________: occurs when the original contract between the lender and the seller is replaced by a new contract between the lender and the buyer

A

Novation

80
Q

Novation is the substitution of one contract for another, where the _______________ will be released from further liability

A

Original borrower

81
Q

The Novation requires the __________ or __________ of ALL parties to the relevant contract

A

Consent or acceptance

82
Q

What are the 2 purposes of foreclosure

A

1) to extinguish the borrower’s equitable right to redeem (no more rights behind foreclosure, lose rights)
2) to allow the lender to realize on its security (so lender can get $ back)

83
Q

With foreclosure, the borrower has ______________, so the legal or contractual right to redeem is already extinguished

A

Defaulted

84
Q

What are the 5 steps with foreclosure

A

1) demand letter to the borrower
2) petition
3) petition hearing
4) order NISI (redemption period)
5) order of conduct of sale (judicial sale) or order absolute

85
Q

The order NISI redemption period is usually how long?

A

6 months

86
Q

___________________: a legal process where a court or a secured lender appoints a neutral third party, known as a receiver, to take control of a company’s or individual’s property or assets. (In this case the mortgaged property)

A

Receiver Appointment

87
Q

What do receivers do?

As in, with the receiver appointment

A
  • collect the rents
  • pay the bills
  • generally keep the business going
88
Q

How do receivers get paid?

A

The receivers pay will be added to the amount outstanding under the mortgage

89
Q

What is a Order NISI (nice guy)

A

1st action step

It sets the final redemption period, during which the respondents can redeem the mortgage by paying the amount due and owing (last chance after defaulting to pay off mortgage to keep property)

Usually lasts 6 months

90
Q

At the first court appearance where a claim for a foreclosure is brought, a judge will generally grant an ___________

A

Order NISI

91
Q

2 forms of foreclosure

A

1) order of conduct of sale (judicial sale)

2) order absolute not foreclosure

92
Q

Order of Conduct of Sale (Judicial Sale)

A
  • not enough equity
  • owner can still be liable - personal covenant
  • most common in BC
93
Q

Order Absolute of Foreclosure

A
  • enough equity in property
  • owner is no longer liable - no personal covenant
  • lender becomes registered owner
  • no further action can be taken against the owner
94
Q

Which of the following most correctly completes the phrase: “a mortgage is…..”

A

A contract, evidence of a loan, and a security for a loan

must say evidence of loan

95
Q

Any clause contained in a mortgage which clogs the equity of redemption is:

A

Void

96
Q

After a borrower has given a mortgage of real property, the borrowers remaining interest as described at law as: 

A

The equity of redemption

97
Q

After the contractual rate redeem has passed on a mortgage…

A

An equitable right to redeem still exists

98
Q

What is an Agreement for Sale

A

An agreement for sale is a contract where the seller keeps legal ownership until the buyer pays the full purchase price. The buyer gains equitable interest and possession, but the title is transferred only after all terms are met.

99
Q

When a mortgagee grants a mortgage subsequent to (after) a first registered mortgage, the mortgage has created what

A

An equitable mortgage

100
Q

Which of the following contractual clauses in a mortgage does not apply where a borrower defaults

A

A “sales” clause

101
Q

A mortgage common in the condominium development industry whereby the mortgage contains a clause that permits the mortgage registered against all of the lots to be released from each individual lot as its purchase is known as what

A

Interim blanket mortgage

102
Q

Where a borrower believes that the amount of interest being charged is excessive, under what statute might relieve be granted

A

The business practises and consumer protection act

103
Q

True or False: A due on sale clause allows the lender to collect on all amounts owing under the mortgage, including prepayment penalties, upon sale of the property

A

True

104
Q

The process where by a mortgage lender transfers his interest in a mortgage to a third-party as known as

A

Assignment baby

105
Q

When the original loan agreement between the lender and a seller of property is replaced by a new loan agreement between the lender and the buyer of the property for the mortgage debt, what legal concept has occurred

A

Novation

106
Q

Describe the best answer in regards to the steps in foreclosure

A

Demand letter, petition, nisi, Absolute foreclosure

107
Q

After an order nisi of foreclosure is granted to a petitioner and the respondent borrower fails to pay the amount due as required by the order, the petitioner may apply for

A

A judicial sale

108
Q

Guaranteed exam question

The key purpose of foreclosure action is to

A

Extinguish the borrowers equitable right to redeem the property

109
Q

Jordan grants Mary a mortgage over his property, Blackacre. One of the terms in the standard mortgage contract that they execute allows Mary, aside from pursuing a foreclosure, to exercise the remedies of an ordinary creditor if Jordan default. If Jordan defaults and Mary pursues this option, she will be taking action on the

A

Personal covenant

UBC Real Estate Licensing Exam (24 decks)

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