Mortgages Flashcards
What are the security interests that apply to land?
- Mortgages
- Deeds of trust
- Installment land contracts
- Absolute deeds - Equitable mortgages
- Sale-Leasebacks
- Equitable Vendor’s Liens
What is a deed of trust?
The debtor is the truster, and gives the deed to a third party trustee. The trustee then hold the deed and executes foreclosure on behalf of the mortgagee in the case of default.
What is an installment land contract?
The seller holds onto legal title until the debtor pays off the value of the land. The debtor’s payments are made in installments.
What is an absolute deed (equitable mortgage)?
The transfer of the deed to the lender with a promise that it will be transferred back upon payment.
What is a sale-leaseback?
Sale of land with a promise to lease back the premises.
How can a mortgagee transfer a mortgage?
The transferee must indorse the note and delivering it to a person and then making a separate assignment of the mortgage to the same person.
How can a mortgage note be transferred?
Either by indorsing it and delivering it to the transferee or by a separate document of assignment.
When is a transferee a holder in due course?
When a note has been properly endorsed and delivered to the transferee. Delivery is proper when: (i) the note is negotiable in form. This means that it says that it is payable to the transferee, and the amount is a fixed amount. (ii) the actual note must be signed by the payee (iii) the original note must be delivered to the transferee (iv) the transferee must take the notice in good faith and must pay value for it. Also, the transferee must not have any notice that the note is overdue or has been dishonored, or that the maker has any defense to the duty to pay it.
Can a property owner whose property is subject to a mortgage transfer the mortgage upon sale?
Yes. If the grantee assumes the mortgage by signing an assumption agreement.
What happens if the grantee signs an assumption agreement?
Both the grantee and the grantor are liable for the mortgage.
What happens if the grantee doesn’t sign an assumption agreement?
The grantee is not liable for the mortgage, but could lose the property if the grantor defaults.
What interests does foreclosure terminate?
The interest initiating the foreclosure and junior interests only.
What happens to junior interests when a mortgage is foreclosed?
They are wiped out.
In what ways can the priority of mortgages be changed?
- Failure to record: If a senior mortgagee fails to record and a subsequent mortgagee does, then the junior mortgagee will take priority according to the relevant recording act. 2. Subordination agreements: Senior mortgagees can subordinate their interests to junior mortgagees. 3. Purchase money mortgages: PMMS have priority over mortgages and encumbrances that existed prior to the mortgagor’s taking of title. But, they are susceptible to subsequent mortgages and liens pursuant to subordination or the recording acts. 4. Modification of Senior Mortgages: junior mortgages gain priority over the modification. 5. Optional Future Advances: if a senior lender makes an “optional” advance while having notice of a junior lien, the advance loses priority to the junior lien. An optional advance is one that the lender is not contractually obligated to make. 6. Subrogation: a mortgage taken our for the purpose of refinancing a preexisting senior mortgage takes that mortgages position.
How are the proceeds from a foreclosure sale allocated?
- First to pay the expenses of the sale, attorney’s fees, and court costs. 2. Then to pay the principal and accrued interest on the loan that was foreclosed 3. Then to pay liens junior to the foreclosed lien 4. The remaining proceeds are distributed to the mortgagor.
