Foreclosure

Question 1

The purpose of foreclosure

Answer 1

is to erase all ownership interests after the mortgage is recorded

-remove equity of redemption

Question 2

Interests acquired by third parties prior to the mortgage in foreclosure

Answer 2

Will remain

Question 3

The mortgagee may not take possession of the property, or foreclose, until

Answer 3

a default has occurred

Question 4

A default is defined by

Answer 4

The mortgage instrument

Question 5

A common default will be

Answer 5

failure to make one or more payments

Question 6

Notice of default for mortgagor

Answer 6

not entitled to receive notice; unless terms require notice

Question 7

When default occurs, often what is due

Answer 7

the entire amount due accelerated under the loan

Question 8

The right to accelerate the loan may be waived if

Answer 8

the mortgagee forgives the default

Question 9

If the mortgagee properly accelerates the loan:

Answer 9

the mortgagor must pay the full amount under the loan

Question 10

What are preforeclosure remedies

3

Answer 10

After a default but prior to a foreclosure sale, the mortgagee has the right to

1. enter the property to protect it from waste and,
2. where appropriate, to ensure its continued productivity
3. Step into the shoes of the mortgagor against third parties

Question 11

Waste

Answer 11

prevents the party in possession of a property from damaging the property if others have interest in the property

Question 12

Foreclosure of a mortgaged property allows

Answer 12

the mortgagee or the trustee to sell the property and use the proceeds from the sale to pay the debt.

Question 13

The sale of the property will give the buyer at the foreclosure sale

Answer 13

the same title held by the mortgagor at the time the mortgage being foreclosed was created

Question 14

North Carolina maintains two methods of foreclosure:

Answer 14

foreclosure by action; and,

foreclosure by power of sale

Question 15

Foreclosure by action is

Answer 15

procedure by a complaint and summons. It is an equitable proceeding inside the judicial system

Question 16

foreclosure by power of sale is

Answer 16

limited judicial involvement

Foreclosure sale is outside the judicial system

Question 17

Requirements of a Foreclosure by action

Answer 17

1. service of a summons and complaint to all parties with an interest in the property
2. notice filed where the deed is filed

Question 18

What foreclosure action complaint contain?

3

Answer 18

1. name and address of the mortgagor,
2. the time and place of the foreclosure hearing,
3. a description of the mortgaged property

Question 19

In a foreclosure action, what must be proven and who must prove it?

Answer 19

Mortgagee must prove

1. the amount of the debt
   +
2. The exact boundaries of the property in question

A question for the jury

Question 20

If necessary parties do not receive notice of a pending foreclosure action, then

Answer 20

it is nullity to that party

Question 21

Who is a necessary party to a foreclosure action?

Answer 21

The mortgagor and all parties obtaining an interest after the mortgaging

Question 22

Foreclosure by power of sale procedure overview

7

Answer 22

1. notice of hearing
2. hearing
3. notice of sale
4. sale
5. Report of trustee
6. Upset Bids
7. Proceed Application

Question 23

When can a foreclosure by power of sale take place?

Answer 23

If, and only if, a mortgage or deed of trust expressly reserves the power of sale

Question 24

What are the notice requirements for foreclosure by power of sale?

Answer 24

1. notice of a hearing to each party entitled to notice
   +
2. Filed with the deed or recording instrument

Question 25

Parties entitled to notice of hearing for foreclosure by power to sale?
(3)

Answer 25

1. anyone obligated personally on the note
2. every record owner of the property (anyone who have a interest in the property)
3. any other party required by terms of mortgage

Question 26

Foreclosure by power to sale, contents of notice must include
(8)

Answer 26

1. real estate interest being foreclosed
2. name and address of the security holder
3. nature of the default claimed
4. notice of acceleration of the debt
5. notice of the right of debtor to pay the indebtedness
6. right of the debtor to appear at the hearing
7. the time and place of hearing
8. the notice that once the foreclosure sale is consummated, the new owner may evict

Question 27

When must notice of hearing, for foreclosure by power to sale be served?

Answer 27

at least 10 days before the hearing

Question 28

Foreclosure by power to sale, hearing requirements to authorize sale
(4)

Answer 28

The clerk will authorize the sale if they find

1. a right to foreclose
2. a valid debt
3. a default, and
4. notice

≠ will not hear defenses or amount of debt

Only question for clerk is if there is a debt

Question 29

Foreclosure by power to sale, what are the notice of the sale requirements?
(4)

Answer 29

1. posting on court house door 20 days before sale,
2. mailing to each party; and,
3. advertising the sale of property once a week for two weeks in the county
4. The notice must contain All the terms of sale

Question 30

Foreclosure by power to sale, time of sale requirement

Answer 30

10-4 on any day that is not a Sunday or a holiday

Question 31

Foreclosure by power to sale, bidding requirement

3

Answer 31

1. the buyer is the highest bidder
2. the bidder cannot be a trustee
3. Trustee files a report with the court within 5 days: final report due in 30 days

Question 32

What is are upset bid requirements?

3

Answer 32

bid by any party within 10 days of the sale

The new bid must exceed high bid by the greater of
5% or $750

starts another 10 day window

Question 33

A power of sale is terminated if, prior to the time fixed for sale or prior to expiration of the time for submitting an upset bid after sale, payment is made of

Answer 33

1. obligation secured by the mortgage; and,

2. expenses incurred related to the sale

Question 34

The proceeds of the foreclosure sale are applied in the following order
(4)

Answer 34

1. cost and expenses of sale
2. taxes due and unpaid on the property
3. obligations secured by the property, then
4. surplus proceeds paid out

Question 35

If a junior lien is being foreclosed, then what happens to the senior liens?

Answer 35

the senior liens are not satisfied from the proceeds because the senior lien stays on the property

Question 36

A junior lienor may not collect any available surplus until

Answer 36

lienor’s right to collect has matured

Question 37

If proceeds of foreclosure sale are insufficient

Answer 37

the mortgagee can institute a deficiency claim against the mortgagor

Question 38

A buyer at a foreclosure sale takes subject to ____ and free from ___

Answer 38

senior liens and free of junior liens

Question 39

If the mortgagor buys the property at foreclosure, what happens to the junior liens?

Answer 39

They reattach

Question 40

What are mortgagor’s remedies in foreclosure

Answer 40

1. redeem the property before sale
2. challenge the foreclosure in court
3. obtain an injunction

Question 41

Mortgagor’s defenses to foreclosure?

Answer 41

1. inadequate sale price
2. failure to comply with notice requirements
3. fraud

Question 42

A sale is void if

Answer 42

there is a fundamental defect

Question 43

If a person personally obligated on a loan is not given notice of a foreclosure hearing. Then what is the effect of a deficiency judgment? What if the person is co owner?

Answer 43

Any deficiency judgment is invalid if against a party that did not get notice

With co-owners, if one receives notice that co owner has a valid deficiency judgment but not the other

Question 44

How can an acceleration clause be waived?

Can the right be recovered?

Answer 44

If the mortgagee regularly accepts late payments, they waive the right of claiming late payment as a default.

Right to accelerate can be regained by giving notice to mortgagor that timely payments are required?