Mortgages

Question 1

Which of the following will preclude the mortgagee’s right to foreclose upon the mortgagors default?

Answer 1

The mortgagees acceptance of a deed in lieu of foreclosure.

Question 1

May a mortgagee be foreclosed by judicial sale?

Answer 1

Yes, in all jurisdictions.

Question 1

Definition:

Answer 1

Under either title theory or intermediate theory, the mortgagee may take possession of the mortgaged property upon the mortagor’s default.

Question 1

A purchase money mortgage (PMM), whether recorded or not, generally will have priority over __________.

Answer 1

A prior non-PMM against the same mortgagor. A PMM is a mortgage given to (i) the vendor of the property as a part of the purchase price, or (ii) a third party who lends funds to allow the buyer to purchase the property.

Question 1

Statutory redemption is the right of a mortgagor to

Answer 1

recover the land by paing the foreclosure sale price AFTER the sale has occurred.

Question 2

May a mortgagee validly transfer the note without the mortgage?

Answer 2

Yes but the mortgage will automatically follow the note.

Question 2

When is a lender entitled to a deficiency judgment?

Answer 2

When the proceeds of a foreclosure sale do not satisfy the mortgage debt.

Question 2

The priority of the proceeds from a foreclosure sale is as follows:

Answer 2

1. Expenses of the Sale, Attorney’s Fees, Court Costs; 2. The principal and accrued interest on the foreclosing party’s loan; 3) Any junior lienors or other junior interests in the order of their priority; 4) The Mortgagor

Question 2

Must a junior mortgagee be named as a party to a senior mortgagee’s foreclosure action?

Answer 2

Yes because it has the right to pay off the senior mortgage to avoid being wiped out by foreclosure.

Question 2

If the proceeds from a foreclosure sale are insufficient to satisfy the debt of a mortgage junior to the one being foreclosed, the result is:

Answer 2

The junior mortgagee may sue the mortgagor for deficiency.

Question 3

When allocating proceeds from a mortgage foreclosure sale, which of the following receives payment last?

Answer 3

The mortgagor.

Question 3

May the foreclosing lender bid on the foreclosure sale?

Answer 3

Yes. Most def. Mos Def?

Question 3

Mortgages on the property that are __________ to a mortgage being foreclosed are __________ by the foreclosure if they are made parties to the foreclosure proceeding.

Answer 3

Junior; extinguished.

Foreclosure destroys interests (e.g. liens, mortgages, leases, easements) junior to the mortgage being foreclosed, but does not affect any interest senior to the mortgage being foreclosed.

Question 3

A clause that requires full payment of a mortgage debt if the mortgagor transfers her interest without the lender’s consent (a “due-on-sale” clause) ________

Answer 3

Is enforceable by an institutional mortgage lender.

Question 3

Power of Sale provisions generally apply to what type of security interest in land?

Answer 3

Deeds of Trust

Question 4

A purchase money mortgage (PMM), whether recorded or not, generally will have priority over:

Answer 4

A prior non-PMM against the same mortgagor. A PMM is a mortgage given to (i) the vendor of the property as a part of the purchase price, or (ii) a third party who lends funds to allow the buyer to purchase the property. Thus, a PMM has priority over prior non-PMMs, even if those other mortgages or liens are recorded first.

Question 4

Must a junior mortgagee be named as a party to a senior mortgagee’s foreclosure action?

Answer 4

Yes, because it has the right to pay off the senior mortgage to avoid being wiped out by foreclosure.

Question 4

When may a mortgagee take possession of the mortgaged property?

Answer 4

On default, in a Title Theory state.

Question 4

What is the purpose/operation of a Due-On-Sale clause?

Answer 4

They exist to benefit the lender, and are designed to (i) protect the lender from the mortgagor’s sale to a poor credit risk or to a person likely to commit waste; and (ii) allow the lender to raise the interest rate or charge an assumption fee when the property is sold.

Question 4

What is a Deed of Trust?

Answer 4

A deed of trust is a security interest in land by which the debtor (trustor) transfers title to the land to a third party (the trustee), such as the lender’s lawyer or a title insurance company, acting on behalf of the lender (the beneficiary).

Question 5

May a mortgagee validly transfer its mortgage interest?

Answer 5

Yes, if the right to enforce the promissory note passes to the transferee.

Question 5

If a mortgagor conveys mortgaged property, when does the grantee become primarily liable to the lender?

Answer 5

If the grantee assumes the mortgage.

Question 5

May the vendor of an installment land contract containing a forefeiture clause reinstate strict performance once she has waived it?

Answer 5

Yes, by giving the purchaser notice and reasonable time to catch up on payments.

Question 5

What generally occurs when a mortgagee transfers a promissory note without a written assignment of the mortgage?

Answer 5

The mortgage follows the note

Question 6

For an institutional mortgagor, what is the effect of a due-on-sale clause when a mortgagor transfers her interest without the lender’s consent?

Answer 6

The lender may demand the debtor pay the remaining debt in full.

Question 6

If a grantor transfers a deed in exchange for case, and the grantee promises to return the land when the case is repaid, a court will likely treat the transaction as:

Answer 6

An Equitable Mortgage

Question 6

When a mortgagee transfers a promissory note, which of the following is required for the transferee to become a holder in due course?

Answer 6

The note must be payable to bearer or to the order of the named payee.

Question 6

How is the priority of a mortgage generally determined?

Answer 6

By the order in which it was placed on the property.

Question 7

If a debtor deeds land to her creditor in exchange for cash, may a court treat the conveyance as a security interest?

Answer 7

Yes, if the creditor promised to return the land when the cash is repaid in full.

Question 8

As between two mortgages, what is the effect on the junior mortgage when the mortgagor accepts an advance of funds from the senior mortgagee?

Answer 8

The junior mortagee is given priority over the advance if the advance was optional.

Question 9

May a mortgagee validly transfer the note without the mortgage?

Answer 9

Yes, but the mortgage will automatically follow the note.

Question 10

__________ is the right of a mortgagor to free the land of the mortgage by paying the amount due, plus interest, at any time BEFORE the foreclosure sale.

Answer 10

Equitable Redemption

Question 11

__________ is the right of a mortgagor to recover the land by paying the foreclosure sale price AFTER the foreclosure sale has occurred.

Answer 11

Statutory Redemption

Question 12

What does it mean for a grantee to assume a mortgage?

Answer 12

The grantee becomes primarily liable to the lender.

Question 13

What is a result of a mortgagor conveying land on which a mortgage was properly recorded?

Answer 13

The mortgage remains on the land.

Question 14

A __________ purchase money mortgage usually has priority over a __________ purchase money mortgage.

Answer 14

Vendor’s; third-party lender’s.