Real Estate Morgages

Question 1

What are real estate mortgages and deeds of trust used for?

Answer 1

To collateralize real estate

Question 2

During a foreclosure the debtor has the benefit of the “equity of redemption”. What does this mean?

Answer 2

It means that before the foreclosure sale, the debtor can redeem the property by paying the creditor the full amount of the debt

Question 3

In an “equity of redemption” situation can the creditor accept less than full payment?

Answer 3

Yes. The creditor can chose to accept any amount they want

Question 4

In some states a debtor has access to the “statutory period of redemption”. What does this mean?

Answer 4

This means that the “equity of redemption” can extend to after the foreclosure sale if the debtor can make the payment within the time requirement

Question 5

A senior mortgage foreclosure will extinguish a junior mortgage. Can a junior mortgage extinguish a senior mortgage?
What is the only junior mortgage that a senior mortgage foreclosure cant extinguish?
What can be done about his junior mortgage?

Answer 5

• No a junior cant ever extinguish a senior
• The only one that it cant extinguish is a tax lien
• If the IRS is given at least 25 days advanced notice of the foreclosure sale it can be extinguished

Question 6

If a property was sold at a foreclosure of a junior mortgage what happens to the senior mortgage?

Answer 6

The buyer will take the property subject to the mortgage

Question 7

If a foreclosure sale does not cover the debt then the creditor can file for a _____________, except in one state, _________.

Answer 7

• deficiency judgment

- California

Question 8

How can you hedge your bet when using high leverage to buy real estate?

Answer 8

1- put very little money down on your multiple purchases

2- agree to only take “subject to” the existing mortgages rather than agreeing to “assume” those obligations

3- Get the seller to finance the balance of the purchase through a non-recourse junior mortgage.

Question 9

Why should you only take property “subject to” the existing mortgages rather than agreeing to “assume” those obligations?

Answer 9

Assuming means the creditor can come after you as if you are the original debtor.

Question 10

How do you get to be “subject to”?

Answer 10

File a non-recourse agreement