PROP 1023 / CHAPTER 5 Flashcards
TRUE OR FALSE?
A mortgage is not debt itself.
ANSWER: TRUE
Although almost all mortgage agreements contain a promise to repay a debt, a mortgage is not a debt itself. It is evidence of a debt.
NOTE ONLY / MORTGAGES
A mortgage is a transfer of a legal or equitable interest in land on the condition that the interest will be returned when the terms of the mortgage contract are performed. This usually means upon repayment of the debt.
A mortgage agreement usually transfers title of the borrower’s land to the lender. However, the transfer has a condition attached. If the borrower repays the loan, or performs some other obligation under the contract, the transfer becomes void or the lender must transfer the interest back to the borrower.
NOTE ONLY / MORTGAGES
A mortgage is a transfer of a legal or equitable interest in land on the condition that the interest will be returned when the terms of the mortgage contract are performed. This usually means upon repayment of the debt.
A mortgage agreement usually transfers title of the borrower’s land to the lender. However, the transfer has a condition attached. If the borrower repays the loan, or performs some other obligation under the contract, the transfer becomes void or the lender must transfer the interest back to the borrower.
Assignment of rent entitles _ _ _ _ _
Assignment of rent entitles the lender to apply the rents against the mortgage debt.
In British Columbia, under the Torrens system of land title registration, all mortgages are registered as _ _ _ _ _ _ _.
In British Columbia, under the Torrens system of land title registration, all mortgages are registered as charges against the title.
A ________ mortgage does not secure a loan. It secures any unpaid balance of the purchase price owing after transfer of title.
A vendor “take-back” mortgage (or vendor take-back mortgage) does not secure a loan. It secures any unpaid balance of the purchase price owing after transfer of title.
Occasionally, real estate projects require loans too large for any one lender. In such instances, a group of lenders may form a __________.
Occasionally, real estate projects require loans too large for any one lender. In such instances, a group of lenders may form a consortium.
NOTE ONLY /
MORTGAGE CONSORTIUMS
Occasionally, real estate projects require loans too large for any one lender. In such instances, a group of lenders may form a CONSORTIUM
Each lender will advance agreed-upon proportions of the loan, secured by a single mortgage in favour of the lenders jointly, or more frequently, in favour of a trustee as their joint representative.
In the latter case, a second document called a trust deed is required. In a trust deed, a trustee agrees to act for the joint benefit of all consortium members and to distribute proportionally to them the loan repayment amounts and interest.
NOTE ONLY /
MORTGAGE CONSORTIUMS
Occasionally, real estate projects require loans too large for any one lender. In such instances, a group of lenders may form a CONSORTIUM
Each lender will advance agreed-upon proportions of the loan, secured by a single mortgage in favour of the lenders jointly, or more frequently, in favour of a trustee as their joint representative.
In the latter case, a second document called a trust deed is required. In a trust deed, a trustee agrees to act for the joint benefit of all consortium members and to distribute proportionally to them the loan repayment amounts and interest.
The _ _ _ _ _ _ serves to establish the time of redemption.
The Order Nisi serves to establish the time of redemption.
What is a collateral mortgage? When is it used?
Occasionally, a borrower giving to a lender a specific mortgage upon a parcel of real estate may own other real property of a lesser value. The lender may ask to have the other real property as additional security for the debt.
Alternatively, a person owning real property may guarantee the loan of another person with whom that owner is closely connected. A separate mortgage may be placed upon the secondary property of the borrower, or upon the property of a guarantor.
In either case, it is referred to as a collateral mortgage.
Explain what a “blanket” mortgage is?
A borrower may pledge a number of parcels of real property as security for a single large loan.
In this instance, a single mortgage document containing descriptions of the properties is executed and registered in each appropriate land title ofice.
This is a “blanket” mortgage.
Unlike a collateral mortgage, no single property is the prime security. The lender must realize upon all of the properties forming the security.
___________ clauses are terms in loan agreements that require the borrower to pay off the loan immediately if certain conditions are met.
Acceleration clauses are terms in loan agreements that require the borrower to pay off the loan immediately if certain conditions are met.
For example, most home mortgages have an acceleration clause that is triggered if the borrower misses too many payments.
Identify the two types of mortgage fraud.
There are two types of mortgage fraud that are the most prevalent: identity fraud and value fraud.
Discuss identity fraud?
There are many variations of identity fraud. In most cases, the fraudster impersonates the registered owner of the property in order to secure a mortgage against the land.
For example, the fraudster electronically obtains information on the property and the registered owner, then transfers title into his/her name thus obtaining title to the land. If there is a registered mortgage on the land, the fraudster can also electronically create a false discharge of the mortgage.
Another variation of identity fraud includes fictitious employment records where the fraudster has created a fake letter of employment or has the number of the employer routed to a co-con-spirator’s phone number who confirms the false employment record.
Another example includes the fraudster posing as the solicitor of a fake purchaser for a transaction and stealing the funds instead of directing the funds to the purchaser or non-existent vendor.
Explain what value fraud is? Outline a “flip” scenario.
Value fraud in mortgage transactions involve an artificial inflation of the price of a piece of property. The artificial increase can be produced by “flipping the property” or a false assessment appraisal.
One “flip” scenario occurs when the fraudster purchases a home from an innocent vendor for a certain price, i.e., $100,000 and then resells the property for a higher price to a co-conspirator for $200,000. The second purchaser (co-conspirator) arranges for a mortgage equivalent to 95% of the purchase price ($190,000). This amount is applied to pay off the first purchase and the rest is left in the hands of the fraudsters who eventually stop making mortgage payments. The lender is then forced to foreclose and sell the property where they will not realize the full amount remaining on the mortgage since the house price was inflated beyond its actual value.
A different version of the flip involves the utilization of a fake appraisal. The fraudster purchases the property and then acquires or creates a false appraisal. The fraudster then sells the house to a purchaser who can qualify for a large mortgage.
The final purchaser who is not involved in the fraud is assured that their investment is sound by receiving the false appraisal. Once the buyer goes to sell the house, they realize the value is over-inflated and must continue to make high mortgage payments on a property whose value is lower than the mortgaged amount.
Where mortgage payments are in default on a revenue producing property, the borrower may ______ the rents to the lender.
Where mortgage payments are in default on a revenue producing property, the borrower may assign the rents to the lender.
