Security Interest in Real Property

Question 1

Equitable Mortgage

Answer 1

Where real property is treated as security interest for a loan. The land/property must be foreclosed on before selling the property to recover for the default.

Example: A conveys land to B in exchange for $30K loan and A agrees to return the land once the $30K is paid off.

Question 2

Deed of Trust

Answer 2

Deed of Trust A deed of trust is given by the debtor to a third party trustee, who holds the Deed of Trust until the loan is paid off. If it isn’t paid off, the trustee can foreclose or it can resell himself.

Question 3

Installment Land Sale Contract

Answer 3

An arrangement where the debtor signs a contract promising to make payments to the seller/lender – BUT the seller keeps title to the property until the loan is paid in full.

Question 4

Right of Redemption

Answer 4

General Rule: At any time right up until moment of foreclosure sale the Debtor can redeem the property by paying the amount that is due and payable - the amount in arrears plus interest - unless acceleration clause
-Acceleration Clause- Debtor must pay off the entire balance of mortgage to redeem property

Question 5

Forfeiture Clause

Answer 5

If debtor misses a payment, the seller can cancel the K, keep all the monies paid to date, and retake property
- Enforceable

Question 6

Due on Sale Clause

Answer 6

Sys that if mortgagor transfers the property without the mortgagee’s consent, the full amount of the loan becomes immediately due and payable

Question 7

Lien Theory v. Title Theory

Answer 7

Lien- Mortgagee has a security interest in property, not title
Title- Mortgagee has legal title.

Question 8

Order for Proceeds of Foreclosure Sale

Answer 8

1. Expenses of sale, attorney’s fees, and court cost
2. Principal and interest of the foreclosed loan
3. Any other junior interest in order of priority
4. Mortagor