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Bar prep - property > Mortgages > Flashcards

Mortgages Flashcards

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1
Q

mortgages

A

creating a mortgage, equitable mortgage, parties’ rights, transferring interests, foreclosure, effect of foreclosure, priorities, redemption

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2
Q

mortgages

creating a mortgage

A

definition, union of elements, legal mortgage, examples

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3
Q

mortgages
creating a mortgage
definition

A

A mortgage is the conveyance of a security interest IN LAND, intended by the parties to be collateral for the repayment of a debt.

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4
Q

mortgages
creating a mortgage
union of elements

A

A mortgage is the union of two elements: a debt and a voluntary lien in debtor’s land to secure a debt.
Debtor is the mortgagor, and creditor is the mortgagee.

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5
Q

mortgages
creating a mortgage
legal mortgage

A

The mortgage must be in writing to satisfy the SoF.

This is the legal mortgage.

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6
Q

mortgages
creating a mortgage
examples

A

note, mortgage deed, security interest in land, deed of trust, sale leaseback.

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7
Q

mortgages

equitable mortgage

A

Rather than executing a note or mortgage deed, O gives creditor a deed that is absolute on its face.
This is called an equitable mortgage.
Between O and creditor, parol evidence is admissible to show intent.

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8
Q

mortgages
equitable mortgage
What if creditor sells property to X?

A

X owns the land.

O’s recourse is to sue creditor for fraud and sale proceeds.

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9
Q

mortgages

parties’ rights

A

Unless and until foreclosure, debtor-mortgagor has TITLE and the RIGHT TO POSSESS.
Creditor-mortgage has a LIEN.

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10
Q

mortgages

transferring interests

A

All parties to a mortgage can transfer their interests.
The mortgage automatically follows a property transferred note.
1. Creditor-mortgagor transfer of interest
2. Recording statutes protect mortgages
3. Personal liability on debt

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11
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest

A

Creditor-mortgage can transfer his interest by:

  1. endorsing the note & delivering it to transferee or
  2. executing a separate document of assignment
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12
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
endorse & deliver the notes

A

If the note is endorsed and delivered, the transferee is eligible to become holder in due course.

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13
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
holder in due course

A

Being a holder in due course means that he takes the note free of any personal defenses that could have been raised against the original mortgage.
Personal defenses include lack of consideration, fraud in the inducement, unconscionability, waiver, estoppel.

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14
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
May the holder in due course foreclose the mortgage despite any personal defense?

A

The holder in due course may foreclose the mortgage despite any personal defense.

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15
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
holder in due course - subject to real defenses

A

The holder in due course is still subject to the real defenses that the maker might raise.
MAD FIFI4

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16
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
holder in due course - MAD FIFI4

A 
MAD FIFI4
Material Alteration
Duress
Fraud in Factum (lie about the instrument)
Incapacity
Illegality
Infancy
Insolvency
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17
Q

mortgages
transferring interests
Creditor-mortgagor transfer of interest
holder in due course - criteria

A

To be a holder in due course, the following criteria must be met:

a. The note must be negotiable (made payable to the named mortgagor)
b. The original note must be indorsed (signed by the named mortgagee)
c. The original note must be delivered to the transferee. (photocopy unacceptable)
d. The transferee must take note IN GOOD FAITH without notice of any illegality, and
e. The transferee must pay VALUE for the note (some amount more than nominal)

18
Q

mortgages
transferring interests
Recording statutes protect mortgages

A

If debtor-mortgagor sells Blackacre, now mortgaged, the lien remains on the land so long as the lien was properly recorded.
All recording statutes apply to mortgages as well as deeds.
Thus, a later buyer takes subject to a properly recorded lien.

19
Q

mortgages
transferring interests
Recording statutes protect mortgages
Does it matter which recording statute a jdx has enacted?

A

It does not matter which recording statute has enacted.
In a notice state, Buyer takes subject to the lien b/c Buyer had record notice.
In a race-notice state, Buyer takes subject to the lien b/c Buyer had record notice AND first bank won the race to record.
Also, in a notice state, a subsequent BFP prevails over a prior grantee or mortgagee who has not yet recorded properly at the time the BFP takes.

20
Q

mortgages
transferring interests
Personal liability on debt

A

Personal liability on the debt depends on if buyer assumed the mortgage or takes subject to the mortgage.

21
Q

mortgages
transferring interests
Personal liability on debt
assuming the mortgage

A

If B has assumed the mortgage, then BOTH O and B are personally liable.
B is primarily liable.
O is secondarily liable.

22
Q

mortgages
transferring interests
Personal liability on debt
taking subject to the mortgage

A

If B takes subject to the mortgage, then B assumes no personal liability.
Only O is personally liable.
But if recorded, the mortgage sticks with the land.
If O cannot pay, the mortgage can be foreclosed.

23
Q

mortgages

foreclosure

A

procedure

distribution of proceeds

24
Q

mortgages

foreclosure - procedure

A

If mortgagee-creditor looks to the land for satisfaction, the mortgagee must foreclose by proper judicial action.
At foreclosure, the land is sold, and the sale proceeds go to satisfy the debt.
If the proceeds are less than the amount owed, mortgagee brings a deficiency action against debtor.
If there is a surplus, junior liens are paid in order of priority and remaining surplus goes to debtor.

25
Q

mortgages

foreclosure - distribution of proceeds

A
  1. Atty fees, foreclosure expenses, any accrued interest on priority lien
  2. Pay off mortgages in order of priority.
    Each claimant is entitled to satisfaction IN FULL before a subordinated lienholder may take.
26
Q

mortgages

effect of foreclosure

A

Foreclosure will terminate junior interests but will not affect senior interests.

27
Q

mortgages
effect of foreclosure
terminate junior interests

A

Junior interests will be paid in descending order w/sale proceeds, assuming funds are left over after full satisfaction of superior claims.
Junior lienholders can proceeds for a deficiency judgment.
But once foreclosure of a superior claim has occurred w/proceeds distributed appropriate, junior lienholders can no longer look to Blackacre for satisfaction.

28
Q

mortgages
effect of foreclosure
terminate junior interests
necessary party

A

Those w/interests subordinate to those of the FCL party are necessary parties to the FCL action.
Debtor-mortgagor is also considered a necessary party and MUST BE JOINED, particularly if creditor wishes to proceed against debtor for a personal deficiency judgment.
Failure to include a necessary party results in the preservation of that party’s claim, despite the foreclosure and sale.
If a necessary party is not joined, his mortgage remains on the land.

29
Q

mortgages
effect of foreclosure
no effect on senior interests

A

FCL does not affect any senior interest.
Buyer at the sale takes subject to such interest.
Buyer is not personally liable to the senior debt, but if the senior mortgage is not paid, eventually the senior creditor will FCL on the land.

30
Q

mortgages

priorities

A
  1. Record
  2. Priority
  3. Purchase money mortgage
  4. Subordination
31
Q

mortgages
priorities
record

A

As a creditor, you must record.

Until you properly record your MTG, you have no priority.

32
Q

mortgages
priorities
priority

A

Once recorded, priority is determined by FIT, FIR.

33
Q

mortgages
priorities
purchase money mortgage

A

PMM: a mortgage given to secure a loan that enables the debtor to acquire the encumbered land.
PMM has superpriority. Assuming proper recordation, PMM has 1st priority in the parcel financed.

34
Q

mortgages
priorities
subordination

A

Subordination AGRs are allowed.

A senior creditor can subordinate his priority to a junior creditor.

35
Q

mortgages

redemption

A

redemption in equity, statutory redemption

36
Q

mortgages
redemption
redemption in equity

A

Equitable redemption is universally recognized up to the date of sale.
At any time prior to the FCL sale, debtor can try to redeem the land.
Once a valid FCL has taken place, the right to equitable redemption is gone.

37
Q

mortgages
redemption
redemption in equity
How is the right of equitable redemption exercised?

A

The right of equitable redemption is exercised by paying off missed payment(s) plus interest and costs.

38
Q

mortgages
redemption
redemption in equity
acceleration clause

A

Acceleration clause permits the MTG to declare the full balance due in the event of default.
If the MTG contains an acceleration clause, the full balance plus accrued interest plus costs must be paid for equitable redemption.

39
Q

mortgages
redemption
redemption in equity
waiver of equitable redemption

A

A debtor-mortgagor may not waive the right to equitable redemption.
Waiver of equitable redemption is known as clogging.

40
Q

mortgages
redemption
statutory redemption

A

Recognized in half the states, statutory redemption gives the debtor-mortgagor a statutory right to redeem for some fixed period after the FCL sale has occurred (typically 6 months to 1 yr).
Where recognized, statutory redemption applies after FCL.
The amount to be paid is usually the FCL sale price (rather than the amount of the original debt).
To recognize statutory redemption, the mortgagor will have the right to possess Blackacre during the statutory period.
When a mortgagor redeems, the effect is to nullify the FCL sale.

Bar prep - property (11 decks)

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