Security Interests (Ch. 9)

Question 1

MORTGAGE

Answer 1

At common law, the mortgage conveyed actual title to Y.

Modernly, mortgage conveys a lien to Y. A lien is a charge against the property to secure a payment.

Question 2

DEED OF TRUST

Answer 2

A variation on a mortgage in which legal title is conveyed not to the mortgagee but to a trustee to secure the repayment of the money.

Question 3

Installment Land Sale Contract

Answer 3

{J1} This is a contract, and no mortgage law is involved. The parties are stuck with what they agreed to.

Burgess v. Shiplet. Buyer makes most of the payments on an installment land sale contract but defaults a few months before completing payments. Court holds that the buyer has no equity in the home and buyer will not receive the deed.

{J2} An installment land sale K is sufficiently similar to a mortgage to create equitable mortgage rights in the buyer.

Bean v. Walker. Buyer defaults on an installment land sale contract after having made payment for several years. The buyer is the equitable owner of the property, and as such, has two rights: (1) the right to recover equity in the property in the event of a sale, and (2) the right to exercise a power of redemption in the event of a default.

Question 4

Equitable Right of Redemption

Answer 4

If the borrower can come up with all the arrears and fees any time before the foreclosure sale, the borrower may exercise their equitable right of redemption and get the property back.

• –Equitable right of redemption not waivable
• –A bank may not charge any fee to homeowner who exercises this right

Question 5

Deed in lieu of Foreclosure

Answer 5

To stop a foreclosure sale from happening, the borrow can attempt to negotiate a deed in lieu of foreclosure. The buyer executes the deed in favor of the bank, the consideration for this conveyance being the amount the buyer still owes on the home.

Question 6

Anti-Deficiency Statutes

Answer 6

Anti-Deficiency Statutes protect a borrower when the foreclosure sale fails to produce enough money to pay off the loan.

In most jurisdictions, the bank is prevented from going after the borrower’s personal assets to satisfy the deficiency.

In many jurisdictions, anti-deficiency statutes only apply to mortgages used to purchase property, not to refinanced mortgages.

Question 7

Assumption of Mortgage (does not happen modernly)

Answer 7

1) When B assumes a mortgage, the lender may hold B personally liable in the event of a deficiency.
2) If B takes subject to the mortgage, the lender may not hold B personally liable in the event of a deficiency.