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T&D.Edits.Real Property > Mortgages > Flashcards

Mortgages Flashcards

1
Q

What are the two instruments that make up a mortgage?

A
  1. A mortgage

And

  1. A mortgage note
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2
Q

What are the types of land security devices?

A
  1. Mortgage
  2. Deed of trust
  3. Absolute deed ​
  4. Installment land-sale contract
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3
Q

What is a mortgage?

A

An interest in real property that is meant to secure the performance of an obligation.

More Info: Mortgage

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4
Q

Who is the mortgagor?

A

The borrower of money who issues the mortgage on the property to the lender.

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5
Q

Who is the mortgagee?

A

The lender because they are receiving the mortgage.

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6
Q

Differentiate between mortgages and notes.

A

Mortgage: represents the interest in the land.

Note: represents the debt of mortgagor.

The mortgage follows the note. If you have the note, then it is presumed you have the mortgage.

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7
Q

What is a deed of trust?

A

When a debtor borrows money from a lender and then deeds the property to a third party. The third party releases the deed back to debtor once they have paid the lender.

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8
Q

What is an absolute deed?

A

When a debtor borrows money then issues a deed to the creditor. If extrinsic evidence establishes that it is meant to be a security, then it will be considered a mortgage.

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9
Q

What is an installment land sale contract?

A

The seller retains the deed until all of the installment payments are made by the buyer. If the buyer defaults, then the seller keeps land and all previous payments.

More Info: Installment Land Sale Contract

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10
Q

What does mortgagee receive under the:

  1. Lien theory
  2. Title theory
  3. Intermediate theory
A

Lien theory: Mortgagee gets a lien on property, mortgagor retains rights to possess and get rents and profits.

Title theory: mMortgagee gets title to the property, mortgagor retains possession, but mortgagee gets rents and profits produced.

Intermediate theory: The lien theory applies until default, then the title theory kicks in.

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11
Q

What are the duties of the possessor of mortgaged property?

A
  1. Manage the property in a reasonably prudent manner
  2. Cannot commit waste
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12
Q

What is the right to prepay a mortgage?

A

There is no right to prepay a mortgage debt unless expressly authorized in the note.

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13
Q

What is a deed in lieu of foreclosure?

A

If mortgagor goes into default, the mortgagor can issue a deed to mortgagee to discharge the mortgage debt and the mortgagee takes it subject to all junior liens attached.

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14
Q

What are the types of foreclosure?

A
  1. Judicial foreclosure
  2. Power of sale foreclosures
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15
Q

When is a power of sale foreclosure available?

A

Only if the mortgage instrument allows for it.

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16
Q

What is a deficiency judgment?

A

Money owed by the borrower to the lender if a foreclosure sale does not cover the amount of the debt.

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17
Q

What is a debtor’s equitable right of redemption?

A

At any time prior to the foreclosure sale, a debtor can redeem the property by paying the full debt amount.

18
Q

In what order do mortgages attach?

A

In the order of the land conveyances

19
Q

What interests are affected by foreclosure sales?

A

Only junior interests are discharged provided they are notified and allowed to participate.

Senior interests are not affected; the buyer of property at foreclosure buys the property with the senior interests attached.

20
Q

What is a debtor’s statutory right of redemption?

A

After foreclosure, a debtor has a limited period of time where the debtor can buy back the property for the purchaser’s purchase price. The right only exists if there is a statute authorizing it.

21
Q

What are the two types of purchase money mortgages?

A

A mortgage must be executed at the same time as the purchase of property.

  1. Vendor purchase money mortgage: A mortgage issued to the seller to ensure payment of purchase price
  2. Third-party purchase money mortgage: Purchase money is borrowed from a third party and the third party is issued a mortgage
    * More Info:* Purchase Money Mortgages
22
Q

What type of mortgage has priority over all other mortgages?

A

Purchase money mortgage - once issued and recorded.

23
Q

What happens when mortgage property is transferred?

A

The mortgage runs with the land, provided it is properly recorded.

24
Q

What is the mortgage liability if taking title:

  1. Subject to the mortgage
  2. Assuming the mortgage
  3. With ambiguous language
A

Subject: there is no personal liability for the debt of the mortgage, land can be seized but deficiency will only be held against original debtor.

Assumption: the purchaser is personally liable for the debts of the mortgage, land can be seized, and they take on primary personal liability.

Ambiguous Language: purchaser takes subject to.

25
Q

What are the rights of the grantor against the grantee if there has been an assumption of the mortgage?

A

The grantor is secondarily liable for the debts of the mortgage. If the grantor is sued pursuant to the mortgage, then they can get the grantee to pay the debt.

26
Q

What are the rights of the grantor against the grantee if there has been an assumption of the mortgage and grantor makes payments following the transfer?

A

The grantor can recover mortgage payments from the grantee.

27
Q

What is subrogation?

A

The rights of the grantor against the grantee if there has been an assumption.

More Info: Subrogation

28
Q

What are due-on-sale clauses?

A

Mortgage note clauses that give the mortgagee the ability to call the entire balance due on an attempt to transfer the property.

29
Q

What words in a recording statute identify the type of recording statute?

A
  1. Race component: first records or records first
  2. Notice: good faith in value or without notice in value
  3. Race-Notice: records first in good faith in value or first records without notice in value
30
Q

When will a non-refundable downpayment be held invalid?

A

When it is a liquidated damages clause that is unenforceable.

31
Q

When is a liquidated damages clause enforceable?

A

When it is a reasonable attempt at a fair compensation in the event of breach.

≠ penalty for failure to perform

More Info: Liquidated Damages Clause

32
Q

How can a land-sale contract be enforced absent a writing?

A

Through any combo of two of the following three:

  1. Buyer pays in full
  2. Buyer takes possession of the land
  3. Buyer makes substantial improvements to the land
33
Q

Will an option to purchase property be enough to trigger the doctrine of equitable conversion?

A

No, there must be a land-sale agreement.

34
Q

The existence of an encumbrance, such as a covenant or equitable servitude, which the buyer did not agree to accept as part of the conveyance, renders title what?

A

Unmarketable

35
Q

What must a senior interest in property do to extinguish a junior interest in property?

A
  1. Make junior interest a plaintiff in a foreclosure action
  2. Give junior interest notice

And

  1. Make a foreclosure sale
36
Q

When there is a modification to a senior mortgage, what is the effect on a junior mortgage?

A

A junior mortgage prevails over the modification if the modification materially prejudices the holder of the junior mortgage.

37
Q

When does a property owner commit waste that is actionable by a mortgagee?

A

When they make physical changes to the property that result in the reduction of the property’s value.

38
Q

In a lien theory jurisdiction, what options does mortgagee have when there is waste?

A
  1. Foreclosure
  2. Obtaining an injunction
  3. Recover damages
39
Q

How must adverse possession be recorded?

A

It is outside of the recording acts and does not need to be recorded to take effect; the proper analysis is first in time first in right.

40
Q

In the absence of a contract provision dealing with quality title, what is the default promise?

A

There is an implied covenant that the title conveyed by the seller will be marketable.

T&D.Edits.Real Property (5 decks)

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