mortgage Flashcards

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1
Q

What is a purchase money mortgage?

A

 A mortgage that covers part, or all, of the purchase price (e.g., as opposed to a mortgage obtained to remodel a kitchen).
 A PMM that is recorded has priority over other types of mortgages.

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2
Q

What is a Future Advance Mortgage?

A

 A future-advance mortgage is any line-of-credit (e.g., construction loan) or home-equity loan where money can be borrowed as it is needed. (money distributed in pieces) `

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3
Q

T or F Mortgages must be in writing to satisfy the Statute of Frauds

A

True

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4
Q

o Two instruments that make up a mortgage:

A

 Mortgage: Document that represents an interest in the land.
 Note: Represents the personal obligation of the debtor to repay the debt. (promise to repay the debt)
 Generally, the mortgage is deemed “to follow the note,” meaning that when the note has been transferred, the mortgage securing it automatically follows to the transferee.

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5
Q

o Creditor’s remedies - choice to sue:
Explain in personam

explain in rem

A

 In Personam: Sue on the note; or

 In Rem: Foreclosing on the land through the mortgage.

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6
Q

EXAMPLE: Seller conveys land to Buyer for $100,000. Buyer pays $20,000 as a down payment, and issues a mortgage to Seller to secure payment of the remaining $80,000. This is what type of Purchase Money Mortgage?

A

• Vendor-Purchase Money Mortgage

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7
Q

explain a third party PMM

A

The buyer borrows money from a third party (typically a bank) to pay off the purchase price and gives a mortgage. Note: this has to be one continuous operation; there are not gaps in time for these occurrences

EXAMPLE: Seller conveys land to Buyer for $100,000. Buyer pays the purchase price with $20,000 from his savings and borrows $80,000 from Bank. Buyer issues a mortgage on the land to Bank to secure payment of the $80,000.

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8
Q

• PMM receives top priority over all other mortgages. To maintain the top priority, the PMM has to be recorded. Why?

A

to give constructive notice to future mortgages

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9
Q

What is a Future Advance Mortgage?

A

 A future-advance mortgage is any line-of-credit (e.g., construction loan) or home-equity loan where money can be borrowed as it is needed. (money distributed in pieces)

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10
Q

 If the lender has discretion to advance funds depending on mortgagor’s financial situation, it is called an ________ future-advance mortgage as opposed to an __________ future-advance mortgage.

A

optional

obligatory

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11
Q

T or F If proper notice is given to future creditors, the mortgage interest attaches on the date that the obligatory future-advance mortgage arrangement is made, not on the date that the funds are actually accessed.

A

True

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12
Q

When does the mortgage interest attach on a obligatory future advance arrangement provided proper notice is given to future creditors?

A

attaches on the date that the obligatory future advance mortgage arrangement is not made not on the date the funds are actually accessed

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13
Q

• In an optional future-advance mortgage, if the mortgagee has notice when it makes the advance that a subsequent creditor has filed, what happens to priority of the future advance mortgage?

A

then the future-advanced mortgage loses its priority

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14
Q

• Split in jurisdictions on what constitutes notice
Majority
Minority

A

Majority view—actual notice of the lien is required. (usually a letter)
Minority view constructive notice is sufficient to protect the creditor.

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15
Q

 The buyer buys land and agrees to pay off the purchase price in installments. The buyer takes possession today, the seller holds on to the deed until the debt is entirely paid. Typically, these types of contracts contain a “time is of the essence” clause.

A

o Installment Land-Sale Contract

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