Mortgages and Security Devices Flashcards
Installment land contract
occurs when the buyer contractually agrees to make installment payments and the seller agrees to convey title to the buyer once the land is paid in full
Forfeiture clause
if debtor misses a payment, seller can cancel the K, keep the money paid, and get the land back
- these clauses are enforceable
Absolute deeds as security
always treated as mortgages
2 kinds: (1) sale or lease with the option to repurchase and (2) absolute deed with a separate promise to convey
Sale or lease with the option to repurchase
absolute deed as security
landowner sells land to someone then leases it back and retains an option to repurchase it at the end of the lease
Absolute deed with a separate promise to reconvey
landowner borrows money from someone and gives a deed for the land in exchange for promise that she will reconvey the land to him if the debt is paid
Transfers by mortgagor
mortgage remains on the property and mortgagor is still personally liable on the note
- new transferee can either take the land “subject to” the mortgage or “assume” the mortgage himself. sometimes there is a novation
Subject to: new transferee is not liable on the mortgage but if the mortgage does not get paid, the mortgagee can foreclose on its interest
Assumes the mortgage: new transferee is personally liable for the mortgage as well as original mortgagor
Novation
when the initial mortgagor, new transferee, and mortgagee all agree that the mortgagor is no longer liable and the transferee assumes all of his duties
- only new transferee is liable
Due on sale clause
if the mortgagor transfers the land without the mortgagee’s consent, the full balance under the loan is due immediately
Transfers by mortgagee
mortgagee can transfer note alone by endorsing and delivering it. mortgage goes along with the note
if one pays the original mortgagee after the note is transferred, the payment does not count towards mortgage unless the the original mortgagee transfers a nonnegotiable note (one that may not be transferred). payment remains effective until mortgagor receives notice of transfer
Lien theory state
mortgagee only has a lien (security interest) and the mortgagor is deemed the owner until foreclosure occurs
Lien theory state
mortgagee only has a lien (security interest) and the mortgagor is deemed the owner until foreclosure occurs, upon which mortgagee may take possession
Title theory state
title is in the mortgagee until the mortgage has been satisfied or foreclosed. mortgagee is entitled to possession upon demand at any time, can take possession as soon as default occurs
Equity of redemption
at any point prior to the foreclosure sale, the debtor can redeem the property by paying everything due under the mortgage agreement
waived if mortgagor gives a deed in lieu of foreclosure, but cannot be waived in the mortgage or deed of trust (clogging the equity of redemption)
Acceleration clauses
clauses that state the entire balance is due if a payment is missed or if the mortgagee is otherwise feeling insecure
Statutory right of redemption
allows mortgagor to get property back after the foreclosure sale by paying the full purchase price if they pay it within (usually) 6 months of the foreclosure
*MI rule: a foreclosed homeowner can recover the property from the purchaser by paying the amount the purchaser paid for the property, plus all taxes, insurance, fees, and interest that has accumulated. legal effect of voiding purchaser’s deed
