Mortgages

Question 1

Mortgage is:

Answer 1

An instrument used to transfer an interest in law as security for the repayment of a debt

Question 2

Requirements for valid mortgage

Answer 2

1. Written agreement
2. Mortgagor has “contractual capacity”
3. Mortgagor must have property interest that can be mortgaged
4. Valid debt
5. Adequate legal description of the property
6. Language in instrument whereby the mortgagor grants interest to mortgagee (“Mortgaging clause”)
7. Written agreement must be “properly executed”
8. Legal delivery and acceptance of the mortgage

Question 3

Acceleration Clause

Answer 3

A clause in note, deed of trust or mortgage providing that if the mortgagor fails to pay any of his payments when due or breaches any of the other covenants in the mortgage instrument, the balance of the obligation becomes immediately due and owing

Question 4

Power of Sale

Answer 4

Provision in mortgage or deed of trust which empowers a mortgagee or trustee without resort to any judicial procedures, to sell the property in the event of default by the mortgagor and apply the proceeds of the sale to satisfy the obligation, the costs of invoking the procedure and expenses of sale

Question 5

Due on sale clause

Answer 5

If the mortgagor or trustor sells, transfers or in any way encumbers the property, the acceleration clause is triggered and the balance of the obligation becomes due

Question 6

Prepayment penalty clause

Answer 6

A penalty extracted from the borrower for the right to repay a debt before it actually becomes due

Question 7

Prepayment penalty clause (when its not allowed)

Answer 7

1. principal amount borrowed 150K or less
2. borrower is a natural person
3. debt incurred by the borrower primarily for personal, family, or household purposes
4. loan secured by 1st mortgage or deed and will be occupied by the borrower as principal dwelling

Question 8

Deed of trust is:

Answer 8

Transfer of an interest in land or real property as security for the repayment of a loan