Title

Question 1

Mortgage:

• 2 Requirements:
• Assignment by Mortgagee (bank):

Answer 1

Mortgage = security for a loan

2 docs are executed by B to finance the purchase price for real prop:

• 1) Note, AND
  
  • promising repayment of the loan
• 2) Mortgage:
  
  • To secure repayment of the loan
  • Recorded by bank in chain of title to realty, (in County Clerk)

Mortgagee (bank) is free to assign or sell both instruments together:

• AFTER mortgage AND note have been executed

Mortgage & Note CAN’T be separated and must be assigned together:

• Similar to option to buy in a lease
• Where option cannot be assigned w/out also assigning the entire lease:
  
  • For P to have standing to sue in a foreclosure action:
    
    • MUST holds both mortgage and note
    • IF NOT:
    • Defaulting mortgagor can move to dismiss foreclosure action

Question 2

When Mortgagor defaults in paying the Note = Bank MAY:

• 2 Remedies
• MBE

Answer 2

When Mortgagor defaults in paying the Note = Bank MAY:

1. Sue on the note for money judgment, OR
   
   • Rare = b/c D has no assets or money
2. Sue in equity on mortgage (mortgage foreclosure action):

• CT will grant foreclosure judgment, AND
  
  • appoint referee to sell realty at foreclosure sale:
• Sale proceeds = pay off the note
• Deficiency Judgment:
  
  • If the mortgage

MBE:

• Mortgagee CAN’T simultaneously pursue both remedies

NOT NY: But 1/2 states:

• Non-judicial foreclosure is allowed
  
  • Cheaper and quicker than NY’s judicial foreclosure requirement
  • No lawyers or CT fees, service by mail, and foreclosure sale does not require CT intervention.

Question 3

Mortgage on new construction:

Answer 3

Mortgage on new construction:

• Frequently is given for “future advances“ (Progress payments):
  
  • Bank does not turn over full amount of loan:
    
    • Spreads payments out as building progresses

Bank has priority over ALL subsequent interest in the realty IF:

• Advancements by bank are mandatory for full amount of loan

HOWEVER:

• If advances are optional w/ lender:
  
  • THEN: Bank has priority in realty
    
    • Only to extent the advances were made before receiving actual notice that subsequent liens or mortgages have attached to the realty.

Question 4

Lien Mortgage Theory:

vs

Title Mortgage Theory:

Answer 4

Lien Mortgage Theory:

• Execution of mortgage by borrower conveys NO title:
• Merely creates lien on realty to secure repayment of the loan

Title Mortgage: (Min state)

• Title passes to the mortgagee (bank)
  
  • BUT solely as security for the debt
• IF JT mortgages his interest in this juris = converts JT to TC
  
  • Extinguishing right of survivorship
  • Even though lender had no right to possess the property
    
    • E.g. A inherits from B in Lien Mortage juris

Title Mortgage = same as absolute conveyance

• Subsequent satisfaction of mortgage = WONT revive JT
  
  • Two tenants own as TCs

Question 5

Mortgage Default:

• Mortgage default for non-payment can be cured by:
• NY

Answer 5

Mortgage Default:

• Mortgage default for non-payment can be cured by:
  
  • tendering the unpaid arrears + interest
  • at any time before the mort debt is formally accelerated
    
    • by bank declaring entire balance due
      
      • b/c of mort default
• **NY = need 90 day notice before accelerating **

Answer 6

Equity of Redemption:

• Allows borrower to protect equity he has in that property:
  
  • Even after mort debt is accelerated:
• Mortgagor always has right to pay off mort amount:
  
  • Before the referee’s hammer falls at the foreclosure auction
  • E.g. get loan to pay off mortgage – then sell house to pay off loan
• This payment by borrower:
  
  • Discharges the debt:
  • Requires Bank to issue a satisfaction of mortgage
    
    • To be recorded in chain of title

NY: Right to redeem is extinguished:

• Once foreclosure sale is final:
  
  • i.e. when hammer falls at auction

Statutory right of redemption: (Maj states)

• Allows debtor to redeem prop after foreclosure sale
• By paying the amount that was paid at the foreclosure sale:
  
  • Lower $ -

**NY: **CANT set aside foreclosure sale

• on basis that price paid was inadequate
• UNLESS:
  
  • CT finds price “shocks the conscience of CT”
    
    • Will then order new sale
    • E.g. $5K for $80K Farm = shocking

Question 7

Deficiency Judgment:

• After foreclosure:
  
  • Mortgage still not satisfied:

Answer 7

Deficiency Judgment:

• ONLY if the fair market value = less than the mortgage amount
  
  • Hypo:
    
    • M foreclosed on 150K mortgage:
    • Prop sold at F-sale for $100K
  • NY: M can recover ONLY $$ that exceeds fair market value of house
    
    • Prop is under water (mortg exceeds fair market value of home)
  • CT disregards price paid at F-sale
    
    • Bank has burden of proving fair market value:

To determine if deficiency exists:

• Mortgage debt minus fair market value of realty:
  
  • (maj of foreclosures) cancels the debt owed to lender

Required procedure in New York:

• Bank MUST:
  
  • bring order to show cause
  • signed by judge AND served on borrower
  • w/in 90 days from when NY foreclosure deed was delivered
    
    • to the foreclosure purchaser
  • IF 90 day SOL expires:
    
    • Proceeds from foreclosure sale are deemed by law to fully satisfy the mortgage debt