Mortgages

Question 1

Legal mortgage

Answer 1

encumbrance in writing

Question 2

Equitable mortgage

Answer 2

Deed absolute on face given as collateral

Question 3

Transfer

Answer 3

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.

Question 4

Assumption of mortgage

Answer 4

Debtor and buyer are personally liable. Buyer primarily liable; debtor secondarily liable.

Question 5

Subject to mortgage

Answer 5

Buyer has no personal liability; only owner is personally liable but home can still be foreclosed.

Question 6

Parties to foreclosure

Answer 6

All junior lienholders must be joined or mortgage will remain on land. D must be joined if seeking deficiency judgment.

Question 7

Amount of foreclosure sale

Answer 7

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.

Question 8

Senior interests

Answer 8

Not affected by foreclosure. B at sale takes subject to senior interest, which can still forecloe if not paid.

Question 9

Priority

Answer 9

First to record, first in right. But, purchase money mortgage has “super-priority”

Question 10

Redemption

Answer 10

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.

Question 11

NC Modified title state

Answer 11

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

Question 12

Deed of trust

Answer 12

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

Question 13

Disguised mortgage

Answer 13

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

Question 14

Release of liability NC

Answer 14

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.

Question 15

Due on sale clause

Answer 15

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.

Question 16

Duty not to commit waste: NC

Answer 16

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.

Question 17

Right of profit: NC

Answer 17

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.

Question 18

Timing of foreclosure NC

Answer 18

IN NC mortgagee must foreclose w/in 10 years upon taking possession

Question 19

Judicially supervised sale NC

Answer 19

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

Question 20

Privately supervised sales

Answer 20

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.

Question 21

Priority of interests

Answer 21

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

Question 22

Future advance mortgage

Answer 22

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.

Question 23

NC Deficiency judment

Answer 23

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.

Question 24

Discharge

Answer 24

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.

Question 25

Prepayment

Answer 25

Under NC law, a mortgagor has a right to prepay w/out penalty unless the note says otherwise. Can’t impose a penalty on loans less than 150K

Question 26

Option in ross or preemptive right

Answer 26

Must be exercised w/in 30 years of creation or it becomes invalid. Except oil, gas, or minerals, created prior to 10/1/95, or held by lessee.