Mortgages - Transfers

Question 1

A grantee who does not assume the mortgage, but rather takes subject to the mortgage, is

Answer 1

not personally liable for the debt.

TEST TIP: get familiar with “subject to the mortgage” meaning that grantor is NOT assuming the responsibilities of the mortgage.

Question 2

How may a borrower transfer real property?

Answer 2

The borrower may transfer the property by deed (i.e., selling), will, or intestate succession.

Question 3

Who is liable for the security instrument after a borrower transfers the property?

Answer 3

The borrower remains personally liable after the transfer unless:

1. The lender releases the borrower from his obligation;

OR

2. The lender modifies the transferee’s obligation.

Question 4

What if the transferee assumes the mortgage?

Answer 4

If the transferee assumes the mortgage, the transferee is primarily liable upon default while the original borrower is secondarily liable.

Question 5

What If the transferee takes title subject to the mortgage?

Answer 5

Then the transferee is NOT personally liable upon default while the original borrower remains liable (this is the default/presumed option). Would have to say “takes subject to mortgage, which grantee assumes and agrees to pay.”

Question 6

What is a due on sale clause?

Answer 6

An acceleration clause that allows the lender to demand immediate full payment from the borrower upon transfer

Question 7

What is a due-on-encumbrance clause?

Answer 7

An acceleration clause that allows the lender to demand accelerated payments from the borrower when the borrower obtains a second mortgage or otherwise encumbers the property.