Mortgages and security devices Flashcards
What are the mortgage requirements ( 3 )
To be a valid mortgage
- in writing
- signed by the party to be charged and
- reasonably identifies the parties/land.
What is a purchase money mortgage
it is used by the buyer to purchase real property and the seller who is the lender secures the mortgage on the property.
(has priority over junior and senior mortgages)
what is a Future advances mortgage
the lender may provide future payments under the original loan
What is the difference between obligatory v optional future payments
obligatory - lender has a duty to pay funds ( no discretion)
Optional = lender has discretion whether to pay
who has priority over other creditors
if future payments are obligatory = all payments are a part of the original loan and have priority.
if future payments are optional - future payments don’t have priority over liens recorded before the payment is made.
What is a lien theory state v a title theory state
lien theory = mortgagee ( lender) has a lien on the land (majority of the states follow this)
title theory - title is transferred to the bank right away
What is a deed of trust
similar to a mortgage that has 3 people
lender
borrower ( purchaser of the property)
third party trustee = holds title until the loan is paid off and when paid off title is transferred to the borrower
What is an assumption of a mortgage ( 2 )
it may be expressed or implied.
- Expressed mortgage assumption - there has to be an express agreement to take the property and continue the mortgage payments.
- Implied mortgage assumption - no express agreement exists.
The grantee/buyer pays the seller the equity in the home and the grantee continues to pay the mortgage company.
if a mortgage is assumed who is liable
If the buyer assumes the mortgage he is primarily and personally liable for the mortgage. seller remains secondarily liable.
What is foreclosure
a bank can begin foreclosure proceedings upon default
what is the Equitable right of redemption
it allows a debtor to redeem the property by paying everything due under the mortgage agreement prior to foreclosure cannot be waived in the mortgage/deed but later for consideration.
What is the acceleration clause
it states the entire balance is due if a payment is missed and it is enforceable
other ways to discharge a mortgage
full payment
the mortgagor can give a deed to the mortgagee in lieu of foreclosure,
who gets paid first in foreclosure proceedings
- the party who forecloses and anyone junior ( order of priority)
- Juniors must be parties to the proceeding
- a PMM is senior if the mortgage was used to purchase the property.
- increasing the mortgage amount, the amount becomes junior if optional but if obligatory increase then senior as well.
what is redemption after foreclosure
allows the debtor to get a property back after the foreclosure sale by paying the full purchase price within a period of time
