Mortgages

Question 1

Mortgage definition generally

Answer 1

an interest in real property that serves as security for an obligation.

Question 2

Lien theory (majority)

Answer 2

1. debtor/mortgagor has title and right to possession until foreclosure and creditor/mortgagee has lien and right to land if there is a default.
2. The Lien stays on the land if the mortgage instrument is properly recorded.
3. a creditor can foreclose by judicial proceedings which terminate junior interests(sub. interests must be joined or remain on land and Buyer takes subject to senior interests)

Question 3

What are the 4 mortgage alternatives?

Answer 3

1. Deed of trust:
2. Installment land K
3. Absolute Deed
4. Conditional sale and repurchase

Question 4

Transfer of mortgage general rule

Answer 4

Unless lender agrees to release, borrower remains liable after transfer of RP.

Question 5

Mortagagor’s liability on transfer of mortgage?

Answer 5

If the transferee assumes the mortgage - then borrower is secondarily liable ( ie if borrower makes payments, she can seek reimbursement from transferee, because they assumed the mortgage.)

The borrower may be relived of liability if the lender impairs the borrowers right of recourse against the transferee by: 1. modifying loan terms, or 2. releasing transferee of liability; or if lender releases or impairs the RP subject to the mortgage.

Due on sale clause - lender can demand immediate payment of full amount due

due on encumbrance clauses - lender can accelerate mortgage upon second mortgage

Question 6

Transferee’s Liability on transfer of mortgage ?

Answer 6

1. If transferee assumes mortgage, transferee is personally liable for mortgage obligation.
2. If transferee takes RP “subject to” mortgage, then the transferee is not personally liable upon default (but the RP may be sold at foreclosure sale).

Question 7

Priority in foreclosure generally

Answer 7

1. If two plus mortgages, foreclosure terminates jr. interest and has no effect on sr. interest.

2.first in time, first in right.

Question 8

Exceptions to foreclosure priority

Answer 8

1. Purchase money mortgage exception: mortgage given at the time of purchase of RP, gen. has priority over mortgagees and liens created by or that arose against the purchaser/mortgagor prior to the purchaser/mortgagor’s acquisition of the property.
2. Recording act exception: mortgages subject to gen. recording act; a recorded interest may take priority over an unrecorded one.