Mortgages and Security Interests Flashcards
Mortgage
Interest in real property secured by a debt
Subject to Mortgage
Buyer: not liable
Seller: remains solely liable
Assumes mortgage
Buyer: agrees to pay and is primarily liable
Seller: secondarily liable
Lien theory: lender cannot take possession until
Foreclosure
(the borrower is considered to be the owner of the mortgaged property)
Title theory : possession theory
Lender can take possession at any time
(lender is the owner until mortgage has been paid in full)
Intermediate theory: possession of property
The lender obtains legal title upon default
Mortgagor considered owner until default
Acceleration clause
Upon default, the lender can demand full payment of the remaining mortgage debt and if the debtor cannot pay, then the lender can move forward with foreclosure proceedings
Doctrine of equitable redemption
Debtor can retain property if they pay the full amount of the unpaid loan before foreclosure
Grantee acquires property subject to a mortgage
Not personally liable for the mortgage debt
Purchase-money mortgage
Borrower takes out loan to secure purchase price
Has priority over all other mortgages and liens
Senior mortgage
First in time
Modification of senior mortgage
Will still retain priority as long as it does not materially prejudice the holders of the junior interests
Prepayment prohibitions or penalties in mortgages are
Generally valid and enforceable
Equitable redemption
Before foreclosure, a debtor can pay what is owed to avoid foreclosure
If there is an acceleration clause, then they must pay the full amount owed on the loan
Deed in lieu of foreclosure
Mortgagor can avoid foreclosure by conveying title to the mortgaged property
Valid as long as they are fair to the grantor
