Real Property _ Mortgages

Question 1

Wait .. before we start anything.
WHAT the frick IS A MORTGAGE, Anni?

MORTGAGES

Answer 1

A mortgage is a security interest given by the debtor to the creditor whereby a loan is made and if it is not paid in full, the sheriff may sell the land at a court-ordered foreclosure sale.

Question 2

Equitable Mortgage

MORTGAGES

Answer 2

An equitable mortgage is an absolute deed with a separate promise of reconveyance

(e.g., borrower owes the lender money and gives the lender an absolute deed, lender promises to reconvey the land to the borrower when the debt is paid.)

Question 3

Purchase Money Mortgage:

MORTGAGES

Answer 3

• Money used to purchase the property
• Always gets priority
• A purchase money mortgage given by the seller takes priority over a purchase money mortgage given by a third-party lender (e.g., a bank).

Question 4

Redemption

MORTGAGES

Answer 4

• Paying off debt to prevent foreclosure

Question 5

Equitable Right of Redemption:

MORTGAGES

Answer 5

• Time from NOTICE to SALE
• Never Waived

Question 6

Statutory Redemption:

MORTGAGES

Answer 6

• Period of time AFTER foreclosure sale

Question 7

Lien Theory:

Answer 7

• Bank only has a LIEN
• Owner holds TITLE
• Owner can sell

Question 8

Title Theory:

MORTGAGES

Answer 8

• Bank holds TITLE
• Owner only has equitable interest
• Owner cannot sell

Question 8

Review:
Severance - Joint Tenancy
Lien Theory v Title Theory

MORTGAGES

Answer 8

• Lien Theory: Mortgage does not sever
• Title Theory: Mortgage SEVERS into tenancy in common

Question 9

Assume the Mortgage:

MORTGAGES

Answer 9

• New buyer takes over payment
• Original owner secondarily liable unless novation

Question 10

Subject to the Mortgage:

MORTGAGES

Answer 10

• Original owner liable for payment
• BUT bank CAN foreclose on new owner

Question 11

Deed in Lieu of Foreclosure:

MORTGAGES

Answer 11

• Sign deed to bank & skip foreclosure proceedings

Question 12

Mortgages Taken AFTER Are Wiped Out:

MORTGAGES

Answer 12

1) Must be given notice
2) Joined to suit

Question 13

Mortgages Taken BEFORE Stay:

MORTGAGES

Answer 13

• Buyer takes Subject to

Question 14

Deficiency Judgment:

MORTGAGES

Answer 14

• Collect the remaining money not recovered by foreclosure sale

Question 15

Installment Land Contract:

MORTGAGES

Answer 15

• No title until all payments made
• Seller can take back after default

Question 16

General Rule for Mortgage Priority

MORTGAGES

Answer 16

“First in time, first in right.” Priority is usually based on the chronological order of mortgages.

Question 17

Changing Priority (4 ways)
By K
PMM
Change in SM
Failure to R

MORTGAGES

Answer 17

By Contract: A senior mortgagee can agree to be subordinate to a junior mortgagee.

Purchase Money Mortgage: Takes priority over other mortgages executed prior, even if those were recorded first. A seller-provided purchase money mortgage has priority over third-party lender mortgages.

Change in Senior Mortgage: Increasing the amount or interest rate of a senior mortgage causes it to lose priority over junior mortgages for the increased amount.

Failure to Record: If a first mortgagee doesn’t record their mortgage and a subsequent mortgagee records, pays for the property, and is unaware of the first mortgage, the subsequent mortgage takes priority.

Question 18

Foreclosure:
Process

MORTGAGES

Answer 18

Process: A mortgagee can foreclose on a debtor in default. Foreclosure sales eliminate junior interests but not senior ones. Buyers at foreclosure sales take the property subject to senior interests.

Question 19

Foreclosure: Rights of Junior Interest Holders

MORTGAGES

Answer 19

Rights of Junior Interest Holders: They can pay off the mortgage being foreclosed to protect their interests and must be parties in the foreclosure proceeding.

Question 20

Foreclosure: Exclusion of Junior Holder

MORTGAGES

Answer 20

Exclusion of Junior Holder: If a junior interest holder isn’t part of the foreclosure process, their interest isn’t eliminated

Question 21

Distribution of Foreclosure Proceeds:
(1) Order of Payment
(2) What happens if funds are deficient?

MORTGAGES

Answer 21

Order of Payment: (1) Foreclosure costs, (2) The foreclosed mortgage, (3) Junior interests in priority order, (4) Any remainder to the mortgagor.

Deficiency: If funds from foreclosure are insufficient, the lender can sue the debtor for the remaining debt.