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11 Cards in this Set
- Front
- Back
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Seller's Options for allowing financing/Security
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1. Refusal - some sellers take cash only
2. Obtain promise to repay (promissory note) a. unsecured creditor b. general creditor - high interest 3. Obtain surety a. co-signer b. accommodation party c. guarantor 4. Obtain collateral a. mortgage b. deed of trust |
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Types of financing arrangements
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1. Purchase-Money mortgage
a. owner financing b. bank financing 2. Deed of Trust 3. Installment land contract |
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Purchase-money mortgage (owner financing)
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Documentation of house as collateral is called a mortgage. If the promissory note is not payed, there is a lien against the property.
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Purchase-money mortgage (bank financing)
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promissory note given to the bank, collateral taken against buyer.
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Deed of Trust
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Security is a deed of trust instead of a mortgage. This authorizes the trustee to sell the land to pay the loan rather than going through formal foreclosure. Over time, there is much less difference between mortgages and deeds of trust.
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Installment land contract
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No deed until the contract is paid in full
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Failure to pay mortgage
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1. common law - mortgagor lost all rights to the property
2. Equity of redemption - After going into default the debtor can get the property back by tendering full payment. 3. Foreclosure - allows the bank to foreclose the equity of redemption. |
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Equity of redemption value
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A borrower in default can sell their equity of redemption.
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Foreclosure
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This eliminates the equity of redemption so the original purchaser now has no more rights to the property.
1. Strict foreclosure (rare) - Bank keeps the house and forgives the debt. No good for homeowners because they lose equity they created. 2. Foreclosure by sale (common) - In Texas, it's 10 am first Tuesday of the month on the courthouse steps. |
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Failure to pay deed of trust
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Includes power of trustee to sell without court proceedings.
1. faster and cheaper than traditional mortgage foreclosure. 2. Over time, states have added protections for the purchaser. |
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Failure to pay installment land contract
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1. Traditional - Seller keeps all payments and land; buyer has no redemption rights.
2. Modern - Provides buyers with protections; Example: can't keep the purchaser price if the buyer made 48 payments, or paid 40 of the price. |
