Mortgages and Security Interests Flashcards
In a title-theory state, can Lender take possession of mortgaged land before default?
Yes, Lender is theoretically* entitled to take possession of the land at any time.
*In practice, the terms of the mortgage typically prohibit Lender from taking possession unless a default occurs.
An absolute deed transferring unrestricted title to property with the intent to secure a debt without formalities is usually enforceable as?
Equitable mortgage*
*competing equities (i.e. good faith contractor) take precedence
How is buyer’s failure to pay Installment Land Contracts handled by courts?
- allow the seller to retain ownership of the property but require some form of restitution to the buyer
- Offer buyer an equitable right of redemption
- Treat the contract as a mortgage, so the seller must foreclose to gain title to the property and the buyer has an equitable right of redemption
What is a novation?
substitution of a new contract for an old one when a party to the original contract agrees to release the other party and substitute a new one
What is grantee taking the land subject to the mortgage?
grantee does not agree to pay and is not personally liable for the debt
What is grantee assuming the mortgage?
grantee expressly agrees to pay and becomes primarily liable for the debt, and the debtor becomes secondarily liable as a surety
What is purchase-money mortgage?
mortgage granted to (1) the seller of real property OR (2) a third-party lender to the extent that the loan proceeds are used to acquire title to the real property.
*loan was directly tied to the purchase of the land
Can a buyer who assumed a mortgage raise defenses that the debtor could have raised?
No, the buyer would be unjustly enriched.
Can a junior mortgagee foreclose if the senior mortgage is not in default?
Yes, a junior mortgagee can foreclose if the loan it secures is in default. The senior mortgage remains unaffected and still in priority.
