financing real property Flashcards
The statutory right of redemption
After foreclosure, a borrower may regain title by redeeming the property from the successful bidder within a set period of time. The borrower must pay the sales price is interest and cost to the bidder
What does it mean for a buyer to assume a loan?
The successive buyer along with the original owner is personally liable for the loan.
What does it mean for a buyer to take subject to a loan?
Only the original owner is personally liable for the loan.
What is a deed of trust?
The borrower (Trustor) gives a deed of trust to a 3rd party (the trustee) for the benefit of the lender (beneficiary). If the trustor defaults, the trustee will sell the property through foreclosure and gives the sales proceeds to the beneficiary to repay the loan.
What is an acceleration clause?
A clause that states a lender can demand payment of the entire balance if debtor misses a payment
What is a secured loan?
When a lender is given a security interest in property (collateral). If the debtor fails to pay, the lender can sell the collateral and use the proceeds to satisfy the loan.
What is the purpose of a mortgage?
A mortgage secures a creditor’s interest in the collateral and provides a remedy if the debtor defaults. Once the obligation (loan) is paid then the mortgage or any other security interest becomes a nullity.
When is a loan unsecured?
When there is no collateral, when it isn’t paid the lender has to fight w/ other creditors to get a piece of the debtor’s property
What is a promissory note?
specialized K between debtor and their bank that sets forth the terms of the lean and the debtor’s promise to repay the loan
What is an installment land contract?
A contract that requires the buyer to pay the purchase price in a series of installments, & the buyer will not receive the deed until they have made all the payments.
What is the traditional rule for installment land contracts?
buyer forfeits all interest in property if they miss a payment
What is the modern rule for installment land contracts?
loan sale contracts treated like mortgages
What is an equitable mortgage?
a sale that looks like a loan, i.e. the deed is given to secure the loan. (sale buyback agreement)
What does the O’Brian test do?
Determine whether an equitable mortgage looks more like a sale or a loan.
What does priority determine
Which mortgagee (bank) gets paid first
