Mortagages Flashcards
What is a promissory note?
a contract by which the borrower promises to repay the lender the loan on certain terms and conditions
What are the 4 key parts of a finance transaction
They are the
1. security
2. obligation
3. foreclosure
4. rights after foreclosure
What is mortgage:
it is a form of collateral for a loan by which the lendee gives an interest in real property to the lender as security for performance of an obligation
Mortgagor vs. mortgagee
mortgagor: borrower
mortgagee: lender
What is due on sale clause?
a condition on the promissory note that states that all the loan must be repaid on the day the sale happens
what are the two options If there is no due on sale clause enforced and property with mortgage is sold to someone else?
- assuming: buyer assumes loan, he and the borrowers are liable to pay it. Buyers assets can be collected as judgment
- taking subject to: if agreement provides buyer will take title subject to the loan, he is not personally liable
What are the specific theories that mortgages are seen under in different jx?
Title theory: mortgage = transfer of title from borrower to lender. Lender has right of possession,
Lien: it is not title, but a security. so no possession till foreclosure occurs
What is a purchase money mortgage?
when the buyer of real property secures loan from seller and gives seller promissory note with a security on the sold property
what is an installment land contract?
an installment land contract is when the buyer promises to pay the purchase price over fixed period of time.
seller retains title while until all payments are Made, while seller has possession.
Furthermore breach is that title is taken, and the paid money is kept as liquidated damages
What is O’Brien Test for equitable mortgage?
- the homeowner remains in possession of the house
- the homeowner is doing things such as maintenance and also paying property taxed
- there is existence of a purchase back option
- there is a difference in sophistication level and bargaining power of parties (lack of representative council)
- there were multiple procedural mistakes that had occurred (improper appraisal, ect)
- seller was in distress due to financial obligations
- substantial difference between the purchase price and the home value
- homeowner remains in possession of the home
What are borrower rights before judicial foreclosure?
they are equitable redemption: all states allow the borrower to avoid foreclosure by paying the loan in full after default but before sale
Reinstatement: as a general rule, a borrower can avoid foreclosure by making missed payments before lender accelerates the loan
Acceleration Clause
Lender demands payment of entire loan if the borrowers miss even one loan payment
Deed in lieu of foreclosure
mortgagor avoids foreclosure by conveying title to the property to the mortgage as part of a negotatiated settlement
Statutory right of redemption
if mortgagor obtains the funds to pay off the loan before the sale is over . The mortgagor must pay the sale price, plus interest and costs.
Setting aside the sale:
a nonjudicial sale will be set aside if
- the sales prices is “grossly inadequate” or will “ shock the conscience of the court”
- a significant procedural regularity occurred such as lender fails to give fair notice or suppress bidding.
lender is required to use reasonable efforts to attract bidders and obtain a fair price
