Mortgages

Front 1

What is a mortgage?

Back 1

A mortgage is a security interest which covers a loan, issued for real property.

Front 2

What is a promissory note?

Back 2

A promise to repay a loan.

Front 3

Secured loan is...

Back 3

Promissory note and a mortgage: a security interest in real property specifically.

Front 4

What are the 4 types of property security devices?

Back 4

1. Mortgages (including deeds of trust)
2. Land contract
3. Deeds of trust
4. Absolute deeds as security

Front 5

Mortgage as a security device

Back 5

i. Purchase money mortgage
ii. Future advance mortgage (home equity line of cr.)

Front 6

Land contract

Back 6

Like rent-to-own

Front 7

Deeds of trust

Back 7

i. Seller xfer legal title is transferred to trustee to hold for the benefit of a thirdparty beneficiary.
ii. In a mortgage set up as a trust.
iii. If buyer default, beneficiary directs trustee to sell property to satisfy debt.
iv. As a installment sales contract, if court concludes that ...

Front 8

Absolute deed as warranty

Back 8

i.
ii. Lender already holds deed; can skip foreclosure rules.
iii. But it court determine it was a loan and functioning as security, then equitable mortgage and impose ordinary mortgage rules.
iv. Courts will examine the following factors.
1. Whether there is evidence of debt.
2. Whether grantee (lender) made promise to return property upon payment of the load.
3. Whether the price is overly low as compared to the property.
4. Evidence of parties' negotiation prior to conveyance.
5. Evidence that the grantor had serious financial problems at the time of conveyance.

Front 9

What are the two types of mortgage theories?

Back 9

1. Title theory
2. Mortgage theory

Front 10

Title theory

Back 10

Lender takes actual title subject to condition of borrower's repayment of the loan.

Front 11

Lien theory (modern)

Back 11

Title passes to the buyer but is subject to the mortgage.

Front 12

"subject to" vs "assuming"

Back 12

i.
ii.

Front 13

Rights and obligations re: mortgage

Back 13

i.
ii.
iii.

Front 14

Due on sale clauses

Back 14

i.
ii.

Front 15

Transfers by mortgagee

Back 15

Mortgage follows the note

Front 16

Foreclosure: general

Back 16

If borrower defaults, lender can take steps to cut-off borrowers ownership interest.

Front 17

List four types of foreclosure

Back 17

1. Judicial
2. By sale
3. Deed in lieu of foreclosure
4. Short sale

Front 18

Judicial foreclosure

Back 18

Mortgagee sue: must prove debt and default of payment; court order debtor's rights foreclosed, usually by sale.
*permitted in all states.

Front 19

By sale

Back 19

a. Mortgagee/lender can skip court proceeding upon default and proceed directly to a sale of property.
b. Some states prohibit deficiency judgment.
c. Nonjudicial sales are always subject to scrutiny after the fact, because judicial foreclosures are final judgments.

Front 20

Deed in lieu of foreclosure

Back 20

Parties may agree to simply hand over the deed, to avoid expense and time of foreclosure.

Front 21

Short sale

Back 21

Sale for less than is owed to lender. Ordinarily, the borrower would need to make up the difference.
*Lender usually surrenders the right to a deficiency judgment.

Front 22

Redemption

Back 22

i.
ii.
iii.