Morgages

Question 1

Fixtures

Answer 1

A mortgage includes the property and any fixtures added to that property before or after the mortgage was created. A fixture is an item that is
(1) attached to property with the intent that it remain attached and
(2) used for a larger component or function of the property

==> if easily removable, not fixtures

Question 2

Among 2 PMSIs..

Answer 2

A seller-financed purchase money mortgage generally takes precedence over a third-party purchase money mortgage.

Question 3

Lien Theory v Title Theory

Answer 3

In a majority of the states, the mortgagor (borrower) is treated as the owner of the real property interest, and the mortgagee (lender) is treated as the holder of a lien on that interest. These states are referred to as “lien states.”

By contrast, in a minority of states, the **mortgagee is treated as the owner of the real property interest, and the mortgagor possesses the right to regain ownership **of the real property upon satisfaction of the obligation. These states are referred to as “title states.”

Foreclosure:
-In a lien theory state, the mortgagee cannot take possession prior to foreclosure because the mortgagor is considered to be the owner of the real property until foreclosure.

-In a title theory state, legal title is in the mortgagee until the mortgage has been fully satisfied. Thus, the mortgagee is theoretically entitled to take possession at any time, although the mortgagee is typically prohibited by the terms of the mortgage from taking possession of the property before default occurs. The mortgagee-in-possession can make repairs, take rent, prevent waste, and lease out vacant space.

Effect on joint tenancy
A joint tenant may grant a mortgage in her joint tenancy interest.
In lien theory states (the majority), the mortgage is only a lien on the property;** the granting of a mortgage does not sever the joint tenancy,** and severance occurs only upon a foreclosure sale following a default.
In title theory states (the minority), the granting of a mortgage by a joint tenant constitutes a transfer of title; the joint tenancy is between the mortgagee and the other joint tenants, and it is severed and converted into a tenancy in common; if there is more than one remaining joint tenant, however, they continue to hold their property interests with each other as joint tenants.

However, when the mortgagor abandons the mortgaged property, the mortgagee may take possession of the property in order to protect its interest in the property, even though the mortgagor is not in default of its loan.

Question 4

Morgagee in Possession

Answer 4

A mortgagee in possession assumes a duty to take reasonable care of the property, and she incurs liability as if she were the owner.

Question 5

JT ROS/ Morgage on Property/ Lien State/ Morgatgee tenant dies?

Answer 5

When a joint tenant dies, that tenant’s interest disappears and the remaining joint tenant’s interest automatically expands to absorb it due to the right of survivorship.

**This means that any mortgage attached to a joint tenant’s interest also disappears when that tenant dies and cannot be enforced against the deceased tenant’s heirs or the surviving tenant **

**Lien theory (majority rule) – a mortgage is merely a lien on the property, which means that granting a mortgage does not sever the joint tenancy, **but a severance will occur upon a foreclosure sale following a default

**Title theory (minority rule) **– a mortgage constitutes a transfer of title, which means that granting a mortgage does sever the joint tenancy and the mortgagor-tenant becomes tenants in common with the other joint tenants

Question 6

Mortgagor Liability

Answer 6

Unless the mortgagee-lender agrees to release the mortgagor-borrower from liability for the loan, the mortgagor-borrower remains personally liable on the loan obligation after the transfer of the mortgaged property.

If the transferee assumes the mortgage obligation,
==> then the transferee as well as the mortgagor-borrower is personally liable to the mortgagee-lender to pay the loan obligation.
==> In the event the mortgagor-borrower makes mortgage payments, she can immediately seek reimbursement from the transferee, since as between the mortgagor-borrower and the transferee, the transferee is primarily liable to the pay the mortgage obligation.
==> However, if the mortgage obligation is unpaid, the lender may sue either the mortgagor-borrower or the transferee-buyer personally and if there is still a deficiency, sue the other.