Mortgage After Tender

Question 1

Default

Answer 1

A borrower who fails to make timely payments on his mortgage obligation.

• A Bank/ Seller is required to give written notice of default and must provide an end date when foreclosure proceedings will begin.

Question 2

Equity of Redemption Period

Answer 2

1. Time after default but before foreclosure. 30, 60, 90 days
2. Before the creditor can act on the default, the borrower is permitted an opportunity to cure his default and regain his land.
3. When this period is done/ runs out and there is still no cure, Mortgagee may foreclose.

Question 3

What is a foreclosure?

Answer 3

Definition: When the equity of the redemption period runs out and there is still no cure, Mortgagee may foreclose.

*2 Types:

1. Strict Foreclosure:
2. Foreclosure by Sale:

Question 4

Strict Foreclosure (Only in Title Theory Jurisdiction)

Answer 4

1. Mortgagee (Creditor) gets an order/ decree foreclosing the right of redemption as of a certain date.
2. Creditor takes the property in exchange for cancelling the debt is also known as Forfeiture.

Question 5

Foreclosure by Sale

Answer 5

1. Usually a judicial sale, but some jurisdictions allow private sales where deeds of trust have been used (Trustee may sell property to satisfy the judgment)
2. If the sale price exceeds the mortgage owed, the surplus goes to the buyer.
3. If sale price is less than the existing mortgage, creditor can get a deficiency judgment for difference under the promissory note signed by a borrower through garnishment (Collect personal property) OR Attachment (Wage Garnishment)

Question 6

Statutory Period of Redemption

Answer 6

Only in some states - Farming communities

1. Some states give the mortgagor up to a year from foreclosure date by sale to come up with the sale price in which to buy it back from the mortgagee.
2. During this 1 year period,bank keeps the title and may not sell it. If buyer doesn’t cure, then bank can sell.

(a)Some states allow this if there is a good reason that the default will be cured.
(b)Other states permit the buyer to stay on the land until the bank decides its over.

Question 7

What do courts do in case of default?

Answer 7

1. Restoration :)
2. Restitution :/
3. Forfeiture :(

Question 8

1. Restoration

Answer 8

• Keep the contract alive if they can, so long as neither party will be hurt.

Question 9

2. Restitution

Answer 9

• Put both parties in the same position they were in before the contract was made.

Question 10

3. Forfeiture

Answer 10

1. The law abhors (Hates) forfeitures.
2. Forfeiture is inappropriate where the contract has been in effect for too long period of time and a substantial amount of the purchase price has been paid.

*Substantial amount: usually more than half of the purchase price but that can vary based on the total purchase price, whether the buyer made any improvement to the land, etc.