Mortgages & Security Devices

Question 1

Mortgage

Answer 1

Indicates the existence of debt

-mortgagee = bank = gee i want my money back

Question 2

Transfer by Mortgagor:

If mortgagor gives away her interest “subject to” the mortgage…

Answer 2

Original mortgagor is liable on the mortgage

Question 3

Transfer by Mortgagor:

If the new transferee “assumes” the interest…

Answer 3

Both the original mortgage + new transferee are liable

** new party ASSUMES liability too!!! **

Question 4

Transfer by Mortgagor:

If there is a novation…

Answer 4

Only the new transferee is liable

Question 5

Due on Sale Clauses

Answer 5

State that if the mortgagor transfers the interest in land without the mortgagee’s consent, the full balance under the loan is due immediately = enforceable

Question 6

Lien Theory (majority) = L&L

Answer 6

Mortgagee only has a lien on the LAND

Question 7

Title Theory (minority)

Answer 7

Title is transferred to the bank right away upon loaning the money

Question 8

Foreclosure

Answer 8

Bank can begin foreclosure proceedings upon default

Question 9

Equity Right of Redeption

Answer 9

Allows a debtor (mortgagor) to redeem the property by paying everything due under the mortgage or deed of trust but may be waived later for consideration

Question 10

Acceleration clauses

Answer 10

The entire balance is due if a payment is missed = enforceable

Question 11

Other ways to discharge a mortgage

Answer 11

1. Full payment; OR

2. Mortgagor can give a deed to the mortgagee in lieu of foreclosure

Question 12

Foreclosure proceeding —- who gets paid?

Answer 12

• Party that forecloses and anyone junior to it is paid off in order of priority
• ALL JUNIOR PARTIES must be parties to the proceeding

** purchase money mortgage (when money loaned to purchase the property) is senior to a non-PMM **

Question 13

Increasing amount due

Answer 13

If a mortgagee voluntarily increases the amount due under a mortgage, the increase in debt becomes junior to existing mortgages

** does NOT apply if the increase was a mandatory future advance **

Question 14

Redemption after foreclosure —- statutory right of redemption

Answer 14

Allows the debtor to get property back after foreclosure sale by paying the full purchase price within a period of time

Question 15

Other types of security devices:

Answer 15

1. absolute deed as security: parties don’t call it a SI but one essentially gives a deed as security
2. deed of trust: similar to mortgage, but a trustee proceeds with foreclosure
3. installment land contract: one pays off land in a “lease” and gets title to the land once all payments are made