Mortgages Flashcards
Know difference between Mortgagor and Mortgagee
Mortgagee the bank or the one receiving the mortgage.
Mortgagor the one that is giving the mortgage on a property as a security interest
Express Vendors Lien in the Deed
Makes it a executory contract,
The vendor will retain** Superior Title **
Remedy: Allows vendor to rescind.
When a vendee (buyer) acquires “equitable title,” it means they have a legal right to eventually gain full ownership of a property based on a purchase agreement, even though the seller (vendor) still holds the legal title until the full purchase price is paid; essentially, the buyer has the right to use and benefit from the property while the seller retains full ownership until all conditions are met.
Express Vendor Liens
Can be reserved in either the deed or a promissory note
If the Vendor Lien is in the Promissory Note
Vendor/Seller can foreclose through a judicial proceeding (or through a power of sale, if there a deed of trust)
Vendor/Seller does not retain Superior Title
Vendee/Buyer has both equitable and legal title
Superior Title
not that superior
Vendor/Seller retains bare naked legal title (meaning that the vendee/seller gets only equitbale title
- Superior title is simply a security interest
- Holder of Superior title can recind or foreclose
-Superior title does not automatically follow a lien assignment. Superior title must be expressly assigned/transferred along with lien
when the vendor lien note and the lien are barred by limitations the vendor loses his superior title and the purchaser succeeds to absolute title
Impairment of Security
Rules and Wrinkles
When secured posistion is worsened
You can sue for injury or impairment of the security
- A holder of a lien has no cause of action for damages to the property – only for injury to his security.
- If the value of the premises after the “damages” is not less than the mortgaged debt, there is no injury.
- When only part of the land is taken, mortgagee is entitled to only so much as is necessary to compensate him for his interest in the taken land.
cant if damaged security is still over the amount owned - only when you become under secure.
Writing and Acceptance
Security Devices & Creation: Deeds of Trust & Mortgages
Writing, Delivery, and Acceptance
* Conveyance of a security interest (via mortgage or deed of trust) is
subject to statute of frauds – mortgagor must sign the document.
- Mortgage / deed of trust must be delivered – can have constructive delivery, so long as the intent of the mortgagor is made clear.
- Understand interim financing issues raise in West.
Homestead and Constitutional Prohibitions
- Texas is particularly protective of homesteads.
- Art. XVI § 50 of Texas Constitution does not permit the enforcement
of liens against a homestead – except for a limited number of
exceptions – and this functions as an independent limit on the
creation of deeds of trusts and mortgages, in Texas.
study more of this
Exceptions
(1) Purchase money loans;
(2) Taxes;
(3) Owelty of partition (dividing up value);
(4) Refinancing an existing lien against a homestead;
(5) Mechanics’ and Materialmen’s liens;
(6) Home equity loans; Reverse mortgages; and
(7) Selected refinancing of manufactured home liens.
ways to make this without in writing
Equitable Mortgages & Liens
2 for trust and 3 exceptions for Mortgages
The following “will create a mortgage in equity or a specific lien on the property so intended to be mortgaged,” even though there is no actual, effective conveyance in writing:
1. An agreement in writing to execute a mortgage upon specific property; OR
2. A mortgage defectively executed; OR
3. An imperfect attempt to create a mortgage.
- A situation giving rise to a resulting trust; OR
- A situation giving rise to a constructive trust.
Resulting Trust
Where property is subject to a deed of trust in favor of the one who provided the money (protects 3rd party lenders).
Constructive Trust
When someone acquires money through fraud, duress, or undue influence and then buys property—the wronged individual can get a lien on the property
- No equitable mortgage will be found where an agreement to loan money in exchange for a mortgage contains no specific description of property.
- No writing or proof of writing therefore no equitable mortgage
- MUST HAVE WRITING OR PROOF OF WRITING WITH A SPECIFIC PROPERTY DESCRIPTION
- Homestead rule does not protect against a lien on the homestead when the lien is part of the purchase money used to buy the property.
Subgrogation
what are the three types
Legal Doctrine that allows one person to take over the rights or remedies of another.
- Equitable (Legal) Subrogation - There is no agreement A third person pays debtor’s obligation – and then gets to slide into the creditor’s position.
Meant to protect against unjust enrichment.
Two main requirements: (a) person whose debt was paid was primarily liable, and (b) claimant paid the debt involuntarily.
- Contractual (Conventional) Subrogation
- he parties agree to substitute one person (the subrogee) into place of another (the subrogor). - Statutory Subrogation -
The one who is getting the rights is the subrogee
The one who is giving the rights is the subrogor
Partial Subrogation
- Agreement between mortgagee and subrogee:
* The parties’ agreement controls.
* I.e., subrogee may be superior, may be inferior, may share position. - No agreement between mortgagee and subrogee:
* Some jurisdictions do not permit partial without agreement (Texas rule).
* If the jurisdiction does permit partial subrogation without agreement, the
mortgagee stays superior as to the unpaid amount, and the subrogee shifts
into second place with respect to the amount paid, provided
Tax Subrogation
III. Tax Subrogation
* Largely governed by statute.
* Subrogee to a tax lien generally only subrogates to security position
Implied Vendors Lien
The implied vendor’s lien arises by operation of law whenever the purchase price is unpaid.
- In other words, there is always an implied vendor’s lien.
- The transferring of land/notes does not terminate the implied VL.
- The law presumes the implied vendor’s lien is waived if there is other security.
- BFP’s can terminate the implied vendor’s lien because they were innocent purchasers.
The Vendees Lien
When a vendor refuses to deliver, or is unable to deliver, the vendee may recover the amount paid . . . And be entitled to a vendee’s lien . . . ”
- AIMED AT PROTECTING THE VENDEE (PURCHASER)
A vendee is entitled, in equity, to a lien on land that is the subject of a sales contract, to the extent of the payments made on the purchase price.
The lien arises only in the event the contract, through the fault of the vendor, is not consummated.
Constructive Trusts
- Where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were permitted to retain it, a constructive trust arises.
o When someone acquires money through fraud, duress, or undue influence and then buys property—the wronged individual can get a lien on the property. - “A constructive trust does not, like an express trust, arise because of a manifestation of an intention to create it, but it is imposed as a remedy to prevent unjust enrichment.”
Owelty
- The difference which is paid by one cotenant to another, for the purpose of equalizing an otherwise unequal partition.
- Cotenant who receives the property of lesser value may obtain a lien on 100% of the other’s partitioned property.
- Partition: when both parties already have an interest in the property & retain an interest after the divvy.
Absolute Deed
- An instrument purporting on its face to be an absolute deed [can] be shown by extrinsic evidence to be in fact a mortgage.
- Parol evidence [is] admissible to show the true intent of the parties, that though that the deed is absolute on its face, it was intended to be a mortgage. o Can look to all circumstances surrounding a conveyance to determine the parties true interests.
o Need clear and convincing evidence to prove a mortgage was actually intended. - Homestead rule applies — if conveyance is actually a mortgage, the mortgage is void to protect the homeowner. (Exceptions still apply)
BFP
- Need a legitamate claim to title
- Pays Value
- Is without notice of someone who has priority over
Person claiming BFP bears burden of proof Except if junior claimfrom a judgment or the legal process
Future Advance Clauses
can only cover such demands as arise directly out of dealings between the parties to the instrument.” (quoting 59 C.J.S. Mortgages)
* “[M]ortgage stipulations securing future indebtedness apply only to those debts which were reasonably within the contemplation of the parties.” o A first-in-time mortgagee with a future advance clause will always be valid and secured IF the future advances are made prior to a 3rd party claim. (superior to 3rd party mortgages which come later).
Mortgages in After - Aqcuired Property
- After-acquired property clause — obligation will be secured by the specific property you now own, and property you later acquire.
- The after-acquired clause is clearly enforceable between the mortgagor and mortgagee
- Between mortgagee and later claimants — not generally enforceable!
o After-acquired property clause does not create good notice to later claimants and mortgagees. You’d have to check records for mortgagor’s other properties in all counties in the country to find out if there is a clause which affects the property in question.
Fixtures
need more clarifications
- Intention is key in determining whether property is a fixture.
- If the item becomes a fixture (part of realty), then the real property claimant wins.
- If the personal property claimant files before the real property interest is recorded then the personal property interest prevails over RPI.
Mechanics and Materialmen Liens
Constitutional Lien
Who and it was case is it available for? Homestead wrinkle?
- Available only to those contracting directly with owner(not available for subcrontractors)
- Availbale for improvements directly to an article or building
- Self executing for non-homesteads ( no notice or filing requirments but need to perfect against third parties)
- -
Mechanics and Materialmen Liens
Statutory Lien
- Puts into effect Constitutional lien
- ## used if you want to bind subcontractors or third parties
M&M
Perfection
2 methods
Retainage and Trapping
- General contractor does not need to perfect any lien (self-executing)
- Subcontractors DO need to perfect lien according to statute if they want a lien.
