Mortgages Flashcards

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1
Q

What is a mortgage?

A

A mortgage is the conveyance of a security interest in land. It is intended to be collateral for the repayment of a monetary obligation.

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2
Q

What do you elements does the mortgage contain?

A

A debt, represented by a note

The voluntary transfer of a security interest (a lien)

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3
Q

If a creditor seeks to transfer their mortgage interest by endorsing the note and delivering it to the transferee, what is the status of the transferee?

A

The transfer would be a holder in due course and would take the note free of any personal defences

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4
Q

For the purpose of a mortgage transfer what are the five personal defences?

A
  1. Lack of consideration
  2. Fraud in the inducement
  3. Waiver
  4. Unconscionability
  5. Estoppel
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5
Q

What are the real defences that can still be raised against a holder in due course?

Remember: MAD F I F I 4

A

Material alteration, meaning a change in the instrument terms

Duress

Fraud in the factum (meaning a lie about the instrument itself)

Incapacity

Illegality

Infancy

Insolvency

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6
Q

What are the requirements for a holder to take due course status?

A

The original note must have been:

Negotiable

Endorsed by the mortgagee

Delivered to the transferee

Taken by the transferee in good faith

Transferee must pay value

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7
Q

Other than meeting the requirements of the holder in due course how else could a creditor transfer their mortgage interest?

A

By executing a separate document of assignment

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8
Q

Who is liable to repay the mortgage if the landowner sells the property to a buyer who “assumes the mortgage”?

A

If buyer assumes the mortgage then the buyer is primarily liable and the seller is secondary liable to repay the debt

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9
Q

If a buyer takes subject to a mortgage who is liable to repay the debt?

A

Buyer has no personal liability only the seller.

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10
Q

If the mortgagor does not repay the debt what steps can the mortgagee/creditor take?

A

Foreclose on the land by initiating judicial proceedings and using the sale proceeds to satisfy the debt.

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11
Q

What is the title theory?

A

The creditor has legal title in the property until the mortgage has been satisfied, thus the creditors entitled to take possession upon demand at any time including when the mortgagor defaults.

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12
Q

What is the intermediate theory?

A

Legal title transfers from the borrower to the lender on default

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13
Q

What is the lien theory?

A

The creditor is deemed to hold a security interest in the land and the borrower is considered the owner until foreclosure

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14
Q

If the proceeds of foreclosure sale are insufficient to satisfy the mortgage what can be credited to?

A

Bring a personal deficiency action

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15
Q

What is the order of priority for Distributing the sale proceeds after foreclosure?

A
  1. Pay attorneys fees and foreclosure expenses
  2. Pay accrued interest on First Bank’s mortgage
  3. Satisfy the creditors in full in order of priority
  4. Deficiency judgement against the debtor
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16
Q

Foreclosure will terminate whose interests?

A

Foreclosure will terminate interest Junior to the mortgage but will not affect senior interest.

17
Q

April closing party must give notice to whom?

A

Everyone whose interests are senior to theirs/Parties that came first in the timeline

18
Q

What is a floating lien or an after acquired collateral clause?

A

It gives the creditor the ability to take a security interest in all of the borrowers property whether acquired now or thereafter

19
Q

A purchase money mortgage gets priority no matter what assuming…?

A

They properly recorded

20
Q

If the mortgage contains an ACCELERATION CLAUSE how is the rights of equitable redemption exercised?

A

The borrower must pay off ENTIRE BALANCE + any accrued interest + costs

21
Q

If the mortgage does NOT contain an acceleration clause how can the borrower exercise the right of equitable redemption?

A

The borrower must pay off the missed payment + any accrued interest + costs

22
Q

What is statutory redemption and when does it apply?

A

This gives the borrower/debtor a statutory right to redeem for a fixed period.

Exerciseable after foreclosure has occurred

23
Q

What is the effect of the borrower redeeming?

A

It nullifies the foreclosure sale and the redeeming owner is restored to title

24
Q

What must the borrower pay in order to exercise statutory redemption of the mortgage?

A

The foreclosure sale price

25
Q

The Dodd Frank act requires understandable and fair terms to a mortgage before it’s made. If the lender violates this act what is the result?

A

The borrower has a defence in the foreclosure action

26
Q

Under the consumer rights during foreclosure process after the borrower has defaulted on the mortgage what must the lender do?

A

Must consider in good faith a request for a loan modification or other alternatives to foreclosure. The lender cannot file a foreclosure action of such request is pending

27
Q

What 5 factors will the court consider when determining whether an equitable mortgage exists?

A
  1. The existence of the debt/promise of payment by the grantor of the deed/borrower
  2. Grantee’s promise to return the deed/land if debt repaid
  3. Whether the loaned amount was much lower than the value of the land
  4. The grantor’s financial distress
  5. Parties’ prior negotiations
28
Q

If a creditor has an equitable mortgage, can they sell the land to repay the debt owed to them?

A

Not without first foreclosing on the land through judicial action.