Mortgages Flashcards
Taking subject to a mortgage
When the mortgagor sells the mortgaged property and gives a deed, the grantee takes subject to the mortgage, which remains on the land. If the grantee does not sign an agreement to assume the mortgage, he does not become personally liable on the loan, and the original mortgagor remains personally liable.
Assuming a mortgage
When the mortgagor sells the mortgaged property and gives a deed, the grantee takes subject to the mortgage, which remains on the land. If the grantee signs an assumption agreement, however, the lender is considered a third-party beneficiary of the agreement, and hence may recover from the assuming grantee, who is primarily liable, or the original mortgagor, who is secondarily liable. In some jurisdictions, a grantee who pays the seller of real property an amount equal to the value of the property minus the outstanding balance on the mortgage might be deemed to have assumed the mortgage by implication.
Foreclosure and deficiency judgments
When an interest is foreclosed, after the expenses and fees are paid, the proceeds of the sale are first used to pay the principal and accrued interest on the loan that was foreclosed, next to pay off any junior liens, and finally any remaining proceeds are distributed to the mortgagor. Although foreclosure destroys all interests junior to the mortgage being foreclosed, it does not affect any senior interests. The buyer at the foreclosure sale takes subject to such interest.
Proceeds from Foreclosure - future advances
Generally, the priority of a mortgage is determined by when it was placed on the property. If a mortgage obligates the lender to make further advances of funds, those future advances will have the same priority as the original mortgage. If a senior lender with notice of a junior lien later makes an advance that is merely optional, the optional advance loses priority to the junior lien.
Equity of redemption
The equity of redemption gives the borrower the right to free the land of the mortgage by paying off the amount due, plus any accrued interest, at any time prior to the foreclosure sale. If the borrower has defaulted on a mortgage with an acceleration clause, he must pay the full balance in order to redeem.
Statutory right of redemption
A statutory right of redemption, recognized in about half the states, gives the borrower a right to redeem for the foreclosure price after the foreclosure sale.
