Mortgages

Question 1

Foreclosure Definition

Answer 1

Legal process by which a homeowner in default on a mortgage is deprived of interest in the property

Question 2

Two Principals of Foreclosure

Answer 2

• Foreclosure eliminates or wipes out the mortgage being foreclosed & all junior interests but does not affect senior interests
• Foreclosure sales proceeds are distributed first to the foreclosing lender then to junior interests in order of priority

Question 3

Two Types of Foreclosures

Answer 3

1) Judicial
2) Non-judicial

Question 4

Borrowers rights before foreclosure sale

Answer 4

• Reinstatement = borrower can avoid foreclosure by paying the missed payments before the lender accelerates the loan
• Equitable Redemption = All states allow the borrower to avoid foreclosure by paying the loan in full after default but before sale closes

Question 5

Borrowers right after foreclosure sale

Answer 5

• Statutory right of redemption - borrower may regain title by redeeming the property from the successful bidder by paying the sales price plus interests and costs
• Setting aside the sale - may be able to set aside if the sales price is so inadequate as to shock the conscience of the court or is so grossly inadequate

Question 6

Deficiency Judgement

Answer 6

If the foreclosure sale proceedings do not fully repay the loan the lender can sue the borrower for breach of K and obtain a deficiency judgement for the remaining balance

Question 7

Mortgage Alt - Deed of Trust

Answer 7

• Language in deed creates an express power of sale in which the lender may instruct the trustee to sell the property at foreclosure if the borrower defaults
• Three party rel = borrower conveys real property in trust to a third party (the trustee) for the benefit of the lender (beneficiary)

Question 8

Mortgage Alt - Installment Land K

Answer 8

• Buyer is allowed to take possession but seller retains the title until all payments are made
• Here the buyer (vendee) promises to pay the purchase price to the seller (vendor) in installments over a fixed period of time

Question 9

Mortgage

Answer 9

security for some other obligation that typically places an encumbrance on real property

Question 10

Mortgagor

Answer 10

person taking the mortgage (borrower)

Question 11

Mortgagee

Answer 11

entity providing the mortgage (lender)

Question 12

Obligation

Answer 12

borrowers duty to repay a loan evidenced by a written promissory note

Question 13

Promissory Note

Answer 13

specialized contract between borrower and lender by which B agrees to repay the loan on certain terms & conditions

Question 14

Down Payment

Answer 14

money a home buyer pays at closing toward the cost of the home - it’s the diff between mortgage amount and the purchase price

Question 15

Equity

Answer 15

current interest in the property minus amount owed on the mortgage

Question 16

Principal

Answer 16

amount of debt excluding interest left on the loan

Question 17

Adjustable-Rate Mortgage (ARM)

Answer 17

a home loan in which the interest rate changes periodically based on a standard financial index

Question 18

Fixed-Rate Mortgage

Answer 18

a home loan in which the interest rate will remain the same throughout the life of the loan most often 15 or 30 years