Mortgages

Question 1

What is a mortgage?

Answer 1

A security device used to secure payment of a debt.

Question 2

What is a purchase money mortgage?

Answer 2

Person takes out a loan for the purpose of purchasing property.

Question 3

What is a future advance mortgage?

Answer 3

A line of credit use for home equity, construction, business, and commercial loan. Often referred to as a second mortgage.

Question 4

What is the lien theory?

Answer 4

The majority view: treats a mortgage as a lien that does not sever a joint tenancy.

Question 5

What is the title theory?

Answer 5

A mortgage does sever a joint tenancy and convert it into a tenancy in common.

Question 6

What is a deed of trust?

Answer 6

Operates like a mortgage but uses a trustee to hold title for the benefit of the lender.

Question 7

What is an installment land contract?

Answer 7

Seller finance is the purchase; seller retains title until the buyer makes final payment on an installment plan.

• traditional role: if the buyer breaches by missing a payment, the seller keeps the installment payments made in the property.
• Morden approach: states are trying to assist defaulting buyers.

Question 8

What is an absolute deed?

Answer 8

Mortgagor transfer the deed for the property instead of conveying a security interest in exchange for the loan.

• if this is a mortgage disguised as a Sale, the borrower must prove a mortgage like agreement by clear and convincing evidence.

You -that there was an obligation created prior to or at the same time with the transfer.

• parole evidence is invisible to make the showing.
• . Statute of fraud’s does not bar or a evidence about the agreement.

Question 9

What is the obligation of the mortgagor when the property is transferred?

Answer 9

Mortgagor remains personally liable after the transfer unless:

• lender releases by mortgagor or
• Lender modifies the transferee (new owner) obligation.

Question 10

What options does a mortgagee have under due on sale clause?

Answer 10

Mortgagee he has the option to demand immediate full payment upon transfer.

Question 11

What option does the mortgagee have on a due-on-encumbrance clause?

Answer 11

Acceleration when the mortgagor obtains a second mortgage or otherwise encumbrance the property.

Question 12

What is the liability of the subsequent transferee when they assume the mortgage?

Answer 12

Upon default, if the transferee (buyer) assumes the mortgage, the transferee is personally liable for the mortgage.

• both the original mortgagor in the transferee are liable upon default.
• The assumption agreement does not have to be in writing.

Question 13

What is the liability of the subsequent transferee if they take “subject to” The mortgage?

Answer 13

Transferee is not personally liable upon default.

Question 14

If the deed is silent as to liability what is the default rule?

Answer 14

Title has been taken “subject to” the mortgage.

Question 15

Who is the mortgagee?

Answer 15

The lender/seller

Question 16

Who is the mortgagor?

Answer 16

Buyer/borrower

Question 17

When can the mortgagee/Lender take possession in a lien theory state?

Answer 17

Lender cannot take possession prior to foreclosure because lender has a lien until foreclosure is complete.

Question 18

When can the mortgagee take possession in a title state?

Answer 18

At any time as lender.

Question 19

When can the lender take possession in an intermediate title theory state?

Answer 19

The mortgage retains title until default, at which point Lender can take possession.

Question 20

What is the Equity of redemption?

Answer 20

Right held by the mortgagor to reclaim and prevent foreclosure upon the full payment of the debt.

Question 21

When was the equity of redemption right the exercise?

Answer 21

Before the foreclosure sale.

Question 22

Can a buyer give up the right to Redeem?

Answer 22

Yes- clogging The equity of redemption.

Question 23

Is the mortgagor responsible if the sale produces less then the mortgagor owes?

Answer 23

Yes-deficiency judgment

Question 24

What is the general rule for priorities mortgages against the land?

Answer 24

1. Senior interest: interest acquired for the interest that is being foreclosed. They survive the foreclosure.
2. Junior interest: interest acquired after the interest that is being for clothes. They are extinguish by the for closure.
3. First in time: surviving that satisfy chronologically.

Question 25

What are the 5 exceptions to the chronological first in time rule?

Answer 25

1. Purchase money mortgage exception
2. Recording at exception
3. Subordination agreement between mortgagee’s
4. Mortgage modification
5. Future advance mortgages

Question 26

What is the purchase money mortgage exception?

Answer 26

The purchase money mortgage has priority over mortgages and liens created by or against the purchaser/mortgagor prior to the purchaser/mortgagors acquisition of the property.

Question 27

What is the recording act exception?

Answer 27

A senior mortgage may sometimes not get recorded. The junior mortgage that satisfies the requirement of the states recording act may take priority over the unrecorded senior mortgage.

Question 28

What is the statutory redemption?

Answer 28

Allows the mortgagor to redeem the property even after the foreclosure sale. The statute enables the homeowner to nullify the foreclosure. It ends the purchasers title and restores title to the homeowner.

Question 29

What are the effects of a Foreclosure?

Answer 29

Foreclosure eliminates the mortgagors interest in the property.

Question 30

What are effects of foreclosure to the purchaser?

Answer 30

Purchaser of the property at the foreclosure sale take the property free and clear of any junior mortgage is subject to any senior mortgage but:

• The purchase may be subject to the mortgagors statutory right of redemption.