Real Property _ Mortgages Flashcards
Wait .. before we start anything.
WHAT the frick IS A MORTGAGE, Anni?
MORTGAGES
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.
Equitable Mortgage
MORTGAGES
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.)
Purchase Money Mortgage:
MORTGAGES
- 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).
Redemption
MORTGAGES
- Paying off debt to prevent foreclosure
Equitable Right of Redemption:
MORTGAGES
- Time from NOTICE to SALE
- Never Waived
Statutory Redemption:
MORTGAGES
- Period of time AFTER foreclosure sale
Lien Theory:
- Bank only has a LIEN
- Owner holds TITLE
- Owner can sell
Title Theory:
MORTGAGES
- Bank holds TITLE
- Owner only has equitable interest
- Owner cannot sell
Review:
Severance - Joint Tenancy
Lien Theory v Title Theory
MORTGAGES
- Lien Theory: Mortgage does not sever
- Title Theory: Mortgage SEVERS into tenancy in common
Assume the Mortgage:
MORTGAGES
- New buyer takes over payment
- Original owner secondarily liable unless novation
Subject to the Mortgage:
MORTGAGES
- Original owner liable for payment
- BUT bank CAN foreclose on new owner
Deed in Lieu of Foreclosure:
MORTGAGES
- Sign deed to bank & skip foreclosure proceedings
Mortgages Taken AFTER Are Wiped Out:
MORTGAGES
1) Must be given notice
2) Joined to suit
Mortgages Taken BEFORE Stay:
MORTGAGES
- Buyer takes Subject to
Deficiency Judgment:
MORTGAGES
- Collect the remaining money not recovered by foreclosure sale
Installment Land Contract:
MORTGAGES
- No title until all payments made
- Seller can take back after default
General Rule for Mortgage Priority
MORTGAGES
“First in time, first in right.” Priority is usually based on the chronological order of mortgages.
Changing Priority (4 ways)
By K
PMM
Change in SM
Failure to R
MORTGAGES
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.
Foreclosure:
Process
MORTGAGES
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.
Foreclosure: Rights of Junior Interest Holders
MORTGAGES
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.
Foreclosure: Exclusion of Junior Holder
MORTGAGES
Exclusion of Junior Holder: If a junior interest holder isn’t part of the foreclosure process, their interest isn’t eliminated
Distribution of Foreclosure Proceeds:
(1) Order of Payment
(2) What happens if funds are deficient?
MORTGAGES
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.
