Mortgages (Module 14) Flashcards
Documents for a Mortgage Transaction
PROMISSORY NOTE
mortgagor’s (debtor being loaned $) personal obligation
Makes it so that mortgagee (creditor) is not limited to just the land as a remedy; htey can foreclose the land and then also sue the mortgagor for payment
MORTGAGE
agreement that says that if the mortgagor stops paying the land can be sold to pay the mortgagee
Purchase-Money Mortgage
Is a security interest; mortgagee lends the money to the debtor so that they can purchase the house/land
Basically bank gives them thte $ to buy the house and the land is collateral
Non-Purchase-Money Mortgage
Mortgagor puts their house/land that they already own as collateral for a loan
Creation of a Mortgage
Union of 1) debt 2) voluntary transfer of a lein on the debtor’s land to secure the loan
Must be in writing to satisfy the SOF; is called a “legal mortgage”
Transfer of Mortgage by Mortgagee
Can freely transfer their interest and the mortgage automatically follows; transfer their interest by:
1) indorsing the note and delivering it to the transferee
2) executing a separate document of assignment
Transfer of Mortgage by Mortgagor
Grantee of a mortgaged property either:
1) assumes the mortgage (is personally liable for it and original mortgagor is secondarily liable; mortgagee can choose to sue either one)
2) take subject to the mortgage (not personally liable but if original mortgagor defaults then the land can be foreclosed upon)
A “due-on-sale” clause is in most modern mortgage agreements and says that m’gee can demand full repayment if the m’gor transfer any interest in the property
Effect of Recording Acts on Mortgages
Recording statutes also protect m’gees who properly record their interest (i.e., they apply the same to mortgages as deeds)
Foreclosure Process
M’gee msut foreclose by proper judicial proceeding, land is sold, and proceeds go to satisfying the debt
M’gor can also tender the mortgagee the deed in lieu of foreclosure
If sale of the property does not fully repay the debt than m’gee can bring a deficiency action against the m’gor; if there’s a surplus the m’gor gets back any money over debt amount
Junior Interest (Foreclosure)
Are necessary parties and must be joined to any foreclosure action
If they aren’t joined then their interest continues with the land the same as senior interest holders
Can pay off senior interest holders so that they don’t lose their interest in the land via the foreclosure
If first priority initiates sale and there are three interest holders, if the sale only pays off the first two then the third’s interest in the land is extinguished and they have to bring a deficiency action to recover their interest
Senior Interest (Foreclosure)
Person with higher priority; if second priority lender forecloses upon the land, whoever buys it at the auction will still have the mortgage from the senior holder attached because senior interest holders interests are not extinguished by sale
Mortgage Priorities
As a creditor you must record your interest in order to take place in the line of priority (so the third person to lend m’gor money can be first priority if the first and second lenders never recorded)
A higher priority creditor can enter into an agreement with a junior creditor and subordinate its priority to them
Equitable Redemption (mortgages)
Equitable redemption is universally recognized up to the date of sale; means that the debtor can pay off their mortgage any time up until the date of the foreclosure; right is cut off once sale happens
Is not waiveable as a matter of public policy
Acceleration Clauses and Redemption (Mortgages)
If the K bt the m’gee and m’gor contains an acceleration clause, then the debtor must pay off the entire mortgage in the redemption period
If there’s no acceleration clause, debtor just has to pay the missed payments amount (and accrued interest) in the redemption period
Statutory Right of Redemption
Many states have statutes that say after the m’gors land is sold in foreclosure, they still have the right w/in a certain period (usually 6-12 months) to pay the price of the foreclosure sale (not their mortgage, the price it sold for) and get land back
