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Property > Mortgages > Flashcards

Mortgages Flashcards

1
Q

who is the mortgagor and who is the mortgagee?

A

mortgagor = the borrower
mortgagee = the lender (bank, etc)

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2
Q

what 2 documents are involved in every mortgage transaction?

A

1) promissory note
2) mortgage

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3
Q

what is a promissory note?

A

the mortgagor’s personal obligation (meaning mortgagee is not limited to the land when seeking a remedy for default – can sue mortgagor personally for payment of the note)

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4
Q

what is the mortgage?

A

the agreement that says that if the mortgagor quits paying, the land can be sold (foreclosed) to pay the mortgagee

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5
Q

what is a purchase money mortgage?

A

an extension of value by a lender who takes as collateral a security interest (mortgage/lien) in the very real estate that its loan enables the mortgagor/borrower to acquire

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6
Q

what is a NON purchase money mortgage?

A

an extension of value by a lender who takes as collateral a security interest (mortgage/lien) in debtor’s real estate BUT the loan is NOT used for purpose of acquiring that same real estate (loan is taken out for any other purpose)

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7
Q

what are the two elements needed to create a mortgage?

A

debt + voluntary transfer of lien (to secure the debt)

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8
Q

generally, must a mortgage be in writing? (legal mortgage)

A

yes (to satisfy SoF)

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9
Q

what is a legal mortgage also known as?

A
  • mortgage deed
  • deed of trust
  • sale leaseback
  • security interest in land
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10
Q

who can transfer their interests in a mortgage?

A

BOTH the mortgagor and the mortgagee

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11
Q

in what 2 ways can a creditor-mortgagee transfer their interest?

A

1) Endorsing the note and delivering it to the transferee, OR
2) executing a separate document of assignment

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12
Q

what is the effect of a properly transferred note?

A

mortgage automatically follows

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13
Q

does a mortgagee need to get the mortgagor’s permission to transfer?

A

NO (mortgagee can transfer freely)

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14
Q

if a mortgagor transfers their property to a grantee and the grantee ASSUMES the mortgage, what is the effect?

A

grantee agrees to be personally liable on the mortgage note (primarily liable to lender, while OG mortgagor is only secondarily liable as a surety)

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15
Q

if a mortgagor transfers their property to a grantee and the grantee merely is SUBJECT TO the mortgage, what is the effect?

A

grantee is NOT personally liable on the mortgage note (BUT mortgagee CAN foreclose on the land if mortgagor defaults)

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16
Q

when may a mortgagee sue BOTH the OG mortgagor and the grantee?

A

only when the grantee has ASSUMED the mortgage (assumption agreement signed)

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17
Q

what is the effect of a due-on-sale clause in a mortgage?

A

it allows the lender to demand FULL payment of the loan if the mortgagor transfers ANY interest in the property without the lender’s consent

18
Q

will the mortgage remain on the land when the land is transferred?

A

yes (so long as its properly recorded)

19
Q

do recording statutes apply to mortgages?

A

YES (they protect mortgagees)

20
Q

in what type of recording jurisdictions will a later buyer take subject to a properly recorded lien (mortgage)?

A

ALL jurisdictions

21
Q

how must a mortgagee proceed when a mortgagor defaults on the loan?

A

by foreclosure thru proper judicial action (can’t self help)

22
Q

what happens if the proceeds from foreclosure are LESS than the amount owed?

A

mortgagee can bring a deficiency action against the debtor

23
Q

what happens if there is a SURPLUS of proceeds from foreclosure? (more than amount owed)

A

junior liens are paid off in order of priority and any remaining surplus goes to the debtor

24
Q

what is the default rule for priority among interests in foreclosure?

A

priority depends on when it was placed on the property (first in time, first in right)

25
Q

how does a buyer at a foreclosure sale take title in relation to multiple mortgages/interests?

A

buyer takes title as it existed when the FORECLOSED mortgage was placed on the property

26
Q

what happens to remaining interests when one mortgage forecloses?

A

all interests SENIOR to the foreclosed mortgage REMAIN on the property (buyer still subject to them), BUT all interests JUNIOR to foreclosed mortgage are extinguished

27
Q

what does “junior interests” include? (foreclosure actions)

A

junior mortgages
liens
leases
easements
all other types of interests

28
Q

when can junior lien-holders NO LONGER look to the land for satisfaction of a debt?

A

once foreclosure of a superior claim has occurred and proceeds have been distributed appropriately

29
Q

who are necessary parties to a foreclosure action?

A

debtor + junior lien holders

30
Q

what is the consequence of failing to include a necessary party in a foreclosure action?

A

results in the preservation of that party’s claim (despite foreclosure/sale) thus the mortgage/lien will REMAIN on the land

31
Q

when does a creditor have priority?

A

once they record (priority determined in order of recording)

32
Q

what kind of priority does a purchase money mortgagee have?

A

FIRST priority in the parcel it financed (super priority)

33
Q

what is a floating lien?

A

when mortgagee takes a security interest in all of debtor’s real estate holdings (present AND future)

34
Q

why would a debtor grant a creditor a floating lien?

A

if the loan on the front end is under-collateralized

35
Q

can a senior creditor subordinate its priority to a junior creditor?

A

yes (by private agreement)

36
Q

what is the right to equitable redemption?

A

at any time prior to the foreclosure sale, the debtor has the right to redeem the land by freeing it of the mortgage (by paying)

37
Q

when is the right to equitable redemption cut off?

A

once a valid foreclosure has taken place

38
Q

what is an acceleration clause?

A

clause that permits the mortgagee to declare the full balance due in the event of default

39
Q

how is the right of equitable redemption exercised when the note does NOT contain an acceleration clause?

A

by paying off missed payments plus accrued interest/costs

40
Q

how is the right of equitable redemption exercised when the note DOES contain an acceleration clause?

A

by paying off the ENTIRE balance (plus interest/costs)

41
Q

may a debtor/mortgagor waive the right to equitable redemption in the mortgage itself?

A

NO (against public policy)

42
Q

what is a statutory right of redemption?

A

mortgagor given right to redeem for some fixed period AFTER the foreclosure sale has occurred
**NOTE = amount to be paid is usually the foreclosure sale price (rather than the amount of the OG debt)

Property (20 decks)

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