Mortgages - Foreclosure Flashcards
A jurisdiction may, by statute, provide
a statutory right of redemption, which sets out an additional time period after the foreclosure sale during which the prior mortgagor and perhaps others have the option to pay a certain sum of money and redeem the title to the property.
The right arises only by statute and only after there has been a foreclosure of the mortgage.
If the jurisdiction provides a statutory right of redemption, it does not matter whether the property being redeemed is residential, commercial, or another type of property, unless the statute so notes.
What is a foreclosure?
A foreclosure is a forced sale of an asset where the proceeds of the sale are used to pay off the debt.
What is a deficiency judgment?
If the foreclosure proceeds are not enough to cover the debt, the lender may seek a deficiency judgment against the borrower. If there are excess proceeds, the money will be used to satisfy other creditors in the following order of priority.
Senior v junior interests at a FC sale
Generally, interests acquired before the interest that is being foreclosed (senior interests) survive the foreclosure while interests acquired after the interest that is being foreclosed (junior interests) are extinguished by the foreclosure.
What is the First in Time rule?
All surviving debts MUST be satisfied in chronological order starting with the oldest and moving down, unless any of the following exceptions apply:
Purchase-Money Mortgages. A purchase-money mortgage has priority over all other mortgages, even those earlier in time, that arose prior to the borrower’s acquisition of the property.
Unrecorded Senior Mortgages. A junior mortgage that is properly recorded may take priority over an unrecorded senior mortgage.
Subordination Agreements. A senior lender can agree to subordinate its interest to a junior interest.
Mortgage Modifications. A senior lender and borrower can agree to modify the mortgage. If the modification is more burdensome on the borrower, the senior lender subordinates its interest. However, only the modification subordinates (the original mortgage remains senior).
As to the priority of purchase money mortgages…
Purchase-Money Mortgages. A purchase-money mortgage has priority over all other mortgages, even those earlier in time, that arose prior to the borrower’s acquisition of the property.
As to the priority of Unrecorded Senior Mortgages…
A junior mortgage that is properly recorded may take priority over an unrecorded senior mortgage.
As to the priority of subordination agreements…
Subordination Agreements. A senior lender can agree to subordinate its interest to a junior interest.
As to the priority of mortgage modifications…
Mortgage Modifications. A senior lender and borrower can agree to modify the mortgage. If the modification is more burdensome on the borrower, the senior lender subordinates its interest. However, only the modification subordinates (the original mortgage remains senior).
What is a statutory right of redemption?
allows an individual to repurchase property sold at a foreclosure sale for a limited amount of time after the sale. This right is not available in all jurisdictions
What is a equitable right of redemption?
allows a landowner to prevent a foreclosure sale by paying the amount due on the mortgage
can only be exercised prior to the foreclosure sale.
