Ma Mortgages

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Mortgages

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Mass is a title theory.

The grantee of a mortgage results in title been vested on a mortgagee, that title will terminate and revert to the mortgagor when the debt is paid.

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Writing required

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A mortgage is a transfer of interest in land, which must be in writing to satisfy the statute of frauds.

The writing must contain:
1. the name of the debtor
2. the name of the secure party
3. a sufficient description of the collateral
4. signed by the debtor

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Conditions implied by Mass Law

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a. a mortgagor must paid the principal and interest when is due
b. a mortgagor is to pay all taxes and assessment on mortgage property at least.
c. a mortgagor is to ensure premises against fire for the amount of the mortgage
d. a mortgagor is not to commit voluntary waste on the premises

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Mortgage covenant example: encumbrances on the land

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A mortgage include implied covenants as in a warranty deed and a mortgagee can sue for breach of mortgage covenant

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Satisfaction of Mortgage

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1. When the mortgage is satisfied (ie: when the debt is paid), title reverts back to the mortgagor.

2. If a mortgagee refuses to accept an unconditional tender of full payment on or before the due date: the mortgage is deemed discharged by the mortgagee's refusal to accept the tender. The debt still exist but as an unsecured debt. ie: house can't be foreclose. The mortgagor retains the right to pay a debt before id due but it is permissible to include the pre-payment fees in a mortgage.

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Prepayment fees are generally upheld b/c protects the lender

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Mass exception:
Prepayment fees are not allowed when dealing with a high cost home mortgage.

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Type of mortgages:

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Deed absolute
reverse mortgage
open-ended mortgage

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Deed absolute

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a. In some cases, a grantor conveys title unconditionally to a grantee without any clause regarding recoveyance of the property. If the conveyance is subject to an agreement that the grantee is to convey the property back to the grantor upon the satisfaction of some obligation, the question is whether this was just a deed or a type of mortgage.
b. In Mass parol evidence is admissible to show that a mortgage was intended.

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Reverse mortgage

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A bank may make a reverse mortgage:
(1) it is allow in residential property ONLY when
(2) the owner of the property is at least 60 yrs of age and occupies the property either in whole or in part.

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A bank cannot issue a reverse mortgage until...

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the bank has received written notice that the prospective borrower has completed an approved reverse mortgage counseling program

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If a reverse mortgage is granted

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loan proceeds are dispersed to the borrower, and the loan becomes due and payable with interest on the happening of 1 of 5 events:

1. at the end of a fix term if there is one
2. upon the death of the borrower
3. upon the conveyance of title of mortgage property
4. upon the borrower seizen to occupy the mortgage property
5. upon default by the borrower under any obligation under the loan agreement

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Open ended mortgage

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1. a mortgagee to provides a line of credit against the property
2. any sum that is borrowed is treated as if it was lent on the date the original mortgage was recorded.
3. as long as sufficient notice is given, an open ended mortgage will be uphelp.

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Creditor's remedy

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Mass has 2 methods of foreclosure:
1. a foreclosure by entry of action
2. a foreclosure under power of sale

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A foreclosure by power of sale
is faster and cheaper

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It avoids going to court. It allows a mortgagee to have a power of sale for default - this is a way of avoiding going to court.

it can be done through judicial foreclosure or it can be done as specified in the mortgage instrument.

* The sale proceedings are covered by statute
* public sale - have a competiting bidding to maximize profits and anyone included the mortgagee can purchase unless the mortgage documents states otherwise

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foreclosure by entry of action

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In this situation, there is no sale. The mortgagee is allow to take possession of mortgage property. The mortgagee then records with the court a certificate of entry and then peaceably takes possession and retain possession for 3 years.

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priority mortgages 2 types:

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1. purchase money mortgage
2. equity mortgage

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Purchase money mortgage

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mortgage that is used to secure payment of a purchase price. It has to be recorded.

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Equity mortgage

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mortgage that is borrowed on the equity of the property.

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Who has super priority?

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In Mass a purchase money mortgage is given super priority - it goes to the top of the priority list.

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Debtor's remedy
Redemption

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Equitable and statutory right of redemption

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Equitable right of redemption

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Mass protects this right. If there is any agreement in the mortgage that tries to take away the equitable right of redemption such agreement will not be enforced

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statutory right of redemption

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Mass does not recognize it

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Acceleration clause

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accelarates a debt
the only way to redeem where there is an acceleration clause is to pay the full amount of the debt.

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Due on sale or Due on Encumbrances clauses

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In Due on Sale Clause (residential) - If somebody tries to sale a mortgage property then that accelerates the debt and is due upon the sale.

In a due on encumbrance clause (commercial)- it accelerates the mortgage and debt is due upon the granting of the encumbrance