Mortgages Flashcards
RECORDING ACTS / PRIORITIES
Bona Fide - good faith and without notice.
Notice jurisdiction - allows subsequent purchasers for value and without notice of a prior conveyance to prevail over the prior transferee, regardless of whether the subsequent purchaser records.
Shelter doctrine - one who purchases land from a bona fide purchaser for value without notice, you assume the status of the bona fide purchaser (step into the shoes) even if the transferee had actual knowledge of the prior unrecorded interest.
PURCHASE MONEY MORTGAGE
Mortgage given to a third party lender (bank) lending funds to borrower (buyer) to purchase a piece of property. In equity courts will prevail over all even pre-recorded creditors.
RACE NOTICE JURISDICTION
“No conveyance or mortgage of real property shall be valid against subsequent purchaser for value and without notice whose conveyance is first recorded.”
Under this statute, a bona fide purchaser is protected only if he records before the prior transferee or mortgagee records. First to record wins the race to title.
ASSUMPTION OF MORTAGE
When a person buys a piece of property that has a mortgage attached to it, the mortgage stays on the property. Lender can still foreclose on the property. Buying subject to mortgage, will not be directly liable for mortgage. Lender has option to foreclose on the land or sue the mortgagor (debtor) on the debt.
If buyer assumes mortgage, he is personally liable for mortgage non-payment.
RIGHT OF REDEMPTION (Security Interest)
Because foreclosure will destroy all interests that are junior to the mortgage being foreclosed, the junior mortgagee has the right to pay it off (redeem it) to avoid being wiped out by its foreclosure.
Statutory right of redemption only available in half the states, AFTER foreclosure has occured.
FORECLOSURE OF MORTAGE
Priority of mortgage is determined by the time it was placed on the property. Senior interest will stay on property. Notice must be given to junior interests, and they will take the remainder of the foreclosure proceed (foreclosing party takes first) and sue the buyer for any deficiency.
