Mortgages and Deeds of Trust

Question 1

Documents required for Paying full price in cash to purchase property
(2)

Answer 1

1. purchase and sale agreement

2. deed

Question 2

Documents required for taking title subject to or assuming loans to purchase a property
(3)

Answer 2

1. purchase and sale agreement
2. deed
3. consent

Question 3

Documents required for obtaining a new loan to purchase a property.
(4)

Answer 3

1. purchase and sale agreement
2. deed
3. fresh mortgage
4. fresh promissory note

Question 4

Deed (def.)

Answer 4

The formal instrument of conveyance for real property

Question 5

Note (def.)

Answer 5

The evidence of the debt

Question 6

Mortgage (def)

Answer 6

Pledge of a security interest in real property; acts as collateral for repayment of a note

Question 7

Home Purchase Money Loan (def.)

Answer 7

Loan used to purchase a home

Question 8

Refinance (def.)

Answer 8

Using a new loan to pay off an old loan

Question 9

Home Equity Mortgage Loan (def.)

Answer 9

A second or junior lien securing a loan on the excess equity in a home

Question 10

Mortgagor (def.)

Answer 10

The borrower

Question 11

Mortgagee (def.)

Answer 11

The lender

Question 12

Recourse (def.)

Answer 12

When lender may look to borrower’s assets other than property to satisfy the debt

Question 13

Non-recourse (def.)

Answer 13

The mortgagee can only recover from the security

Question 14

A mortgage is

Answer 14

interest in land securing an obligation to be performed by the mortgagor.

Once the obligation is performed, the interest is void

Question 15

In the United States there are two theories of mortgages

2

Answer 15

1. Lien theory: mortgage is a lien on the property
2. Title theory: the mortgagor convey’s a determinable fee to the creditor or mortgagee, the satisfaction of the obligation restores title to mortgagor.

Question 16

Upon the mortgagor’s default, in title theory:

Answer 16

The mortgagee is entitled to possession and rents

Question 17

What kind of state is N.C. (lien theory or title theory)

Answer 17

Title theory; however, mortgagor keeps possession of title until it breaches a condition

Question 18

Deed of Trust is?

Answer 18

The mortgagor conveys the land to a third party trustee to be held for the benefit of the creditor.

Question 19

Parties in a Deed of Trust?

Answer 19

Trustee: holds the property
Beneficiary: Mortgagee/Lender
Trustor: Mortgagor/Borrower

Question 20

What power does the trustee have in a deed of trust?

Answer 20

power of sale

Question 21

What is a power of sale?

Answer 21

Allows the trustee to sell the land and apply to the death

Question 22

North Carolina lenders prefer a deed of trust because?

Answer 22

Without the third party, if the mortgagee bought the property at foreclosure, it would be a voidable transaction

The deed of trust avoids this problem because the trustee exercises the power of sale, leaving the mortgagee free to bid at the sale, as it frequently wishes to do.

Question 23

The trustee owes what duty?

Answer 23

Duty of fairness

-May not purchase the property from power of sale

Question 24

What is the trustee’s role in a deed of trust?

Answer 24

Prepares for an manages the foreclosure and sale of the property

Question 25

How can trustee be removed

Answer 25

Written action of mortgagee

Question 26

An absolute deed is?

Answer 26

An unconditional conveyance of land without any clause regarding re-conveyance of property

Question 27

N.C. rules on absolute deeds?

Answer 27

Absent fraud/mistake -Parole evidence has no bearing on absolute deeds (cannot interpret as mortgage)

Question 28

Option to repurchase?

Answer 28

The grantor may convey land by absolute deed and contemporaneously execute a written agreement with the grantee that the grantee will reconvey upon performance of some condition. -Intent determines if it is a mortgage or a option to repurchase

Question 29

An installment land contract, or contract for deed, is?

Answer 29

An agreement whereby the buyer of land buys the land over installments -seller does not transfer title until the buyer pays the entire purchase price

Question 30

a defaulting buyer under an installment land contract has few remedies: what happens?

Answer 30

In default - Subject to immediate dispossession - No right of redemption - No foreclosure protections

Question 31

Mortgage Requirements | 5

Answer 31

1. Writing 2. Contents 3. Delivery, Acceptance, Recording 4. Capacity 5. Consideration

Question 32

Contents requirement of mortgage | 4

Answer 32

1. names of all of the parties 2. sufficient description of the party 3. A granting clause 4. properly signed my mortgagor

Question 33

Adequate consideration for a mortgage? | 3

Answer 33

1. Cash 2. Forbearance of a legal right 3. Benefits to third parties

Question 34

Capacity needed for mortgage

Answer 34

The mortgagor must have the power and capacity to mortgage the land

Question 35

The debt or obligation secured by the mortgage should be specified in the instrument; however, what if it refers to another document?

Answer 35

Okay to incorporate by reference

Question 36

The equity of redemption is

Answer 36

The right for mortgagor or his successor to redeem the property form the creditor

Question 37

In order for a mortgage to be valid against subsequent bona fide purchasers or creditors

Answer 37

it must be recorded in the county or counties where the land lies -if unrecorded still valid against the mortgagor

Question 38

How long does mortgagor have equity of redemption?

Answer 38

Until foreclosure is completed

Question 39

What does equity of redemption require? | 5

Answer 39

``` A mortgage is the lending instrument + Default + Borrower has to pay back the total amount of mortgage debt + any accrued interest and cost - Rents collected by lender ```

Question 40

When does equity of redemption apply?

Answer 40

When the owner is in default

Question 41

Who does the equity of redemption apply?

Answer 41

Anyone with an interest in the property that would be prejudiced by a foreclosure sale

Question 42

Can equity of redemption be waived?

Answer 42

no, not even in the instrument | "once a mortgage, always a mortgage"

Question 43

Equity of redemption only terminates when?

Answer 43

1. there has been a valid foreclosure sale. | 2. Lender has been in possession continuously for 10 years after the right to redeem accrues.

Question 44

Equity of redemption is only a right for borrowers if?

Answer 44

The instrument they used is a mortgage

Question 45

What is a purchase money mortgage?

Answer 45

a loan made for the purpose of acquiring the property securing the mortgage

Question 46

Types of purchase money mortgage? | 2

Answer 46

1. bank --> buyer --> seller of property | 2. seller --> buyer

Question 47

What is the priority of a purchase money mortgage?

Answer 47

If properly recorded, Superior to all liens incurred by the buyer of the mortgage, even if filed prior to mortgage Not against, the seller at the time of the mortgage

Question 48

When foreclosure is on the horizon, what is the priority?

Answer 48

Interest acquired before mortgage survive foreclosure, and those after are extinguished

Question 49

What determines the order of priority among interest holders.

Answer 49

Prior in time is prior in right

Question 50

What is the doctrine of instantaneous seisin?

Answer 50

In order

Question 51

Clauses in mortgages that secure future advances as well as the present debt are permissible if

Answer 51

1. it secures future obligations 2. defines the maximum principal amount 3. gives time period

Question 52

After-acquired property is

Answer 52

property the borrower acquires subsequent to the execution of a mortgagor

Question 53

An after-acquired property clause is

Answer 53

a provision in the mortgage instrument that creates a security interest in the lender on all of the borrower's subsequent property purchases

Question 54

What is the effectiveness of an after-acquired property clause?

Answer 54

It is effective against the borrower; however, it needs to be recorded on each piece of subsequent property purchased in order to be valid against that property's lien creditors

Question 55

After-acquired property clause only covers?

Answer 55

Real Property

Question 56

To make assignment valid, what must be assigned?

Answer 56

Mortgage instrument + note