Mortgages Flashcards
Mortgagor
Borrower
Mortgagee
Lender
Promissory Note
Legally binding promise to repay the debt
Title Theory
Seller maintains title until the mortgage is paid (minority)
Lein Theory
Buyer holds the title, Seller holds lien (excess payment from the property sale goes to the mortgagor)
Conventional Mortgage
The buyer gets the title and starts to attain equity
Seller gets purchase price for mortgagee
The creditor gets Fee Simple Absolute
When the debt is paid, the mortgage becomes VOID
Deed of Trust
Land conveyed to a third party, the trustee holds it for the benefit of the holder of the promissory note
Purchase Money Mortgage
Financed by the seller; a buyer receives a deed, and the seller takes a mortgage
Equitable Mortgage
Any document that pledges land as security for the debt (option to repurchase, sell, leaseback, or a covenant not to convey)
Installment Land Contract
Little to no down payment, but paid in monthly installments. The seller retains the title until the purchase is completed; by default, the buyer loses the land and payments made
Prepayment Clause
right to prepay the entire principal
Acceleration Clause
immediate repayment of the entire outstanding principal upon default, with the ability for the mortgagee to waive
Written Notice
Given with reasonable time to cure; requires actual notice
Equity of Redemption
Begins at the time of receipt of written notice (30- 90 days); EOR waivers are automatically VOID and universally unenforced
Foreclosure
EOR period has ended; claim over property
Strict Foreclosure
(title theory) decree the foreclosing of the right of redemption on a certain date; results in a forfeiture (creditor takes property and cancels debt)
Foreclosure by Sale
(lein theory) usually a judicial sale or private where there is a deed of trust; sell the property to satisfy the judgment
Statutory Period of Redemption
period after redemption (up to a year) to come up with the sale price and buy the property back (primarily used in farm communities)
Transfers Subject to the Mortgage
(Sublease): May only file suit against the original mortgagor if the subsequent mortgagor is in default
Assume the Mortgage
(Assignment): promise to pay the promissory note; ability to see both the original and subsequent mortgagor
Novation
Agreement to substitute the OG w/ the subsequent mortgagor on both the mortgage and the promissory note
