Mortgages Flashcards
Legal mortgage
encumbrance in writing
Equitable mortgage
Deed absolute on face given as collateral
Transfer
Note must be negotiable and made payable to named mortgagee;
original note must be endorsed and signed by mortgagee;
original must be delivered;
transferee must take note in GF w/out notice of illegality;
Transferee must pay value for note.
Transferee is is holder in due course.
T takes free of personal defenses but subject to real defenses.
MAD FIFI4: material alteration, duress, fraud in factum, incapacity, illegality, infancy, insolvency.
Assumption of mortgage
Debtor and buyer are personally liable. Buyer primarily liable; debtor secondarily liable.
Subject to mortgage
Buyer has no personal liability; only owner is personally liable but home can still be foreclosed.
Parties to foreclosure
All junior lienholders must be joined or mortgage will remain on land. D must be joined if seeking deficiency judgment.
Amount of foreclosure sale
If sale less then debt, mortgagee brings deficiency action. If sale greater than debt, jr liens paid in full by order of priority, surplus to debtor.
Senior interests
Not affected by foreclosure. B at sale takes subject to senior interest, which can still forecloe if not paid.
Priority
First to record, first in right. But, purchase money mortgage has “super-priority”
Redemption
In equity: up to date of sale, debtor may pay missed payments + interest + cost.
Statutory redemption: redeem w/in fixed period. Mortgagor has right to possess during that time.
NC Modified title state
Minority rule
The mortgagee is the legal owner of the mortgaged property, but the mortgagor has the right to possess the property until default.
Mortgagee can foreclose to cover obligation.
Mortgagee may have right to take possession
Deed of trust
Most security arrangements in NC are done w/ a deed of trust.
Borrower gives title to 3rd party as security for loan
Trustee will return it to the borrower when debt is paid
Trustee will sell it for the bank if the debt is not paid
Disguised mortgage
Courts look for:
Continued existence of debtor-creditor relationship
Grantor’s distress
Continued possession of property
Whether repurchase price is equivalent to obligation of buyer, rather than FMV
Release of liability NC
In NC the lender’s release or impairment discharges the borrower’s liability but only to the extent of the value of the property released, based on the property’s value either at time or release or at time of the action on the obligation is commenced, whichever is higher.
Due on sale clause
If borrower wants to transfer property to someone else, the bank can demand whole obligation be paid. Unlike federal law, NC enforces due on sale clauses for residential properties.
Duty not to commit waste: NC
A mortgagor must not commit waste; includes payment of real property taxes, if mortgagee pays the real property taxes, it obtains a high priority lien on the property.
Right of profit: NC
A mortgagor in possession is entitled to rents and profits, even if in default.
A mortgagee in possession may apply any rents and profits toward the mortgage obligation.
Timing of foreclosure NC
IN NC mortgagee must foreclose w/in 10 years upon taking possession
Judicially supervised sale NC
AKA foreclosure by auction
Court appoints someone to auction property
Notice must include: location, description of property, terms of sale.
Purpose to ensure competitive bids
W/in 5 days of the sale a report must be filed w/ the clerk.
W/in 10 days of the filed report, a person can put in an upset bid.
An upset bid of at least $750 or 5% more than current price, whichever is greater. Upset bidder must post that amount as a bond.
Upset bid goes through the same process. Continues until 10 days have elapsed.
Sale becomes final upon judicial confirmation
Privately supervised sales
A privately supervised sale is also known as power of sale foreclosures.
Faster/cheaper than judicial sales
Notice fore pre-sale hearing must be served at least 10 days before hearing
If publication by notice is permitted, it must be posted on teh property at least 20 days before hearing.
Required parties include anyone that owes money on the property debt and any owner of record.
If a required person does not receive adequate notice, they can’t be pursued in a post-sale for deficiency
If the property is a principal residence, the clerk must also confirm:
At least 45 days prior to notice of hearing, written notice was sent to mortgagor of available resources to avoid foreclosure.
The mortgagee tried to resolve the matter voluntarily w/ the debtor.
The clerk may delay the sale up to 60 days if such measures have a reasonable likelihood of resolving delinquency w/ out foreclosure.
If mortgagor has been in active military service, the presale hearing can’t happen w/in 90 days of the end of that service.
Anyone w/ an equitable interest in the property can file an action in Superior Court to enjoin the sale, on the ground that the purchase price is too low and will result in irreparable damage.
Priority of interests
Must be considered if the sale of the property does not satisfy the loan on the property
In NC a tax lien on real property has highest priority
Future advance mortgage
Priority over subsequent mortgages when mortgage agreement provides for:
property secures future advances,
maximum principle that may be secure,
period can’t exceed 30 years where advances may be made.
NC Deficiency judment
NC permits mortgagee to seek a deficiency judgment except on:
Purchase money mortgage
When there is lack of notice
When the reasonable value exceeds purchase price; and under the SOL
Mortgagee must seek judgment w/in 1 year or w/in time remaining on mortgage note, whichever is shorter.
Discharge
If nothing is filed either way, mortgage automatically expires 15 years after the stated maturity date, or 35 years after first recorded if no date.
Even if mortgagor and mortgagee interest end up held by same person, merger doesn’t occur, contrary to most jx, unless both parties intended it to.
