Real Property- Mortgages

Front 1

Mortgage defined

Back 1

A mortgage is any conveyance of land intended byt he parties at the time of making to be s ecurity for the paymetn of money or the doing of some prescribed act.

Front 2

What is an equitable mortgage?

Back 2

An equitable mortage is created by certain security transaction in land that do not satisfy the requiremetns of legal mortgages, but may still be enforceable.

Front 3

What is th epriority and termination of an equitable mortgage?

Back 3

Preference over subsequent creditors BUT

cut off by bona fide purchaser.

Front 4

When will a deed conveying real property be construed as a legal mortgage?

Back 4

If there are any other written intruments that make it appear that the legal deed was inteded to create a mortgage.

Front 5

What type of obligations are securable by mortgage?

Back 5

Any existing money/money equivalent obligation including:

 

1. preexisting debts and

2. debts of one other than the mortgagor

Front 6

What property is subject to a mortgage

Back 6

Any transferable interest in real propery may be mortgaged

 

(e.g. fee simple, life estate, interest in concurrent interest)

Front 7

What defenses are available against a mortgage?

Back 7

The same defenses available against assertion of the underlying obligation that the mortgage secures.

Although the mortgage/foreclosure may be valid even though underlyign not is illegal or fraudulent.

Front 8

What is usury?

Back 8

A defense available against actions for principal and/or interest, or relief from mortgage if the mortgagor is not a corporation.

 

Also available to corporation with single asset of one or two family dwelling purchased w/in 6 months of mortgage.

 

Front 9

In the event of a conflict between a mortgage and a note, what controls?

Back 9

The note.

Front 10

What rights does a mortgagee have to land?

Back 10

Only a lien.

 

A mortgagee may take possession until the debt is paid if she has the express or implied consent of the mortgagor.

Front 11

What rights does a mortgagor have to land?

Back 11

Untile foreclosure, title and right to posession.

 

May not commit waste, or impair value.

Front 12

What are the general requiremesnts for mortgage transfers?

Back 12

There must be notice of the mortage.

 

The mortgagee must record or risk losign her lien if an assignee of property records.

Front 13

What is the effect of assignment of a mortgage with the debt?

Back 13

Void.

Front 14

An assignee of the mortgagee takes subject to existing equities in favor of the mortgagor EXCEPT

Back 14

when the mortgage secures a negotiable instrument that has been assigned to a holder in due course.

Front 15

Payment is valid when made to the mortgagee instead of the assignee

Back 15

UNITL the mortgagor receives notice of assignment of the note and mortgage,

 

EXCEPT where the debt is represetned by a negotiable instrument that has been transferred to a bona fide purchaser.

Front 16

if a mortgagee and transferee modifiy a mortgage obligation that is transferred subejct to the mortgage, what result?

Back 16

the original mortgagor is discharged from his suretyship

Front 17

Assumption of mortage requirements:

Back 17

1. a writing stating that transferee assumes an dagrees to pay the mortgage debt;

2. amount of debt

3. a deed reciting the assumption of debt and the amoutn of teh debt.

 

Front 18

if a mortgagee and transferee modifiy a mortgage assumed, what result?

Back 18

discharges the mortgagor

Front 19

What is an original mortgagor's liability on an assumed mortgage?

Back 19

Secondarily liable.

Front 20

What is the difference between assuming a mortgage and taking subejct to a mortgage?

Back 20

If the transferee takes subject to a mortgage the property may be foreclosed on, but she is not held liable.

 

If the transferee assumed the mortgage the property may be foreclosed on, and she may be held liable.

Front 21

If mortgagor conveys the property to mortgagee, what result?

Back 21

If value is equal to remaining debt, the conveyance satisfies the bond and mortgage.

Front 22

If beneficiary takes property of decedent with a mortgage, what result?

Back 22

If encumbered by a mortgage, the beneficiary takes subjec tot the mortgage.

Front 23

What result if no payments and property has been taken by a beneficiary of decedent?

Back 23

Mortgagee may, first, foreclose.

 

If foreclose does not satisy, then decedent's estate.

 

Personal representatives, devisee, and distributees are NOT liable.

Front 24

What options does amotgee have if the mortgage debt is due and unpaid?

Back 24

1. sue on debt

2. foreclose on mortgage

Front 25

If mortgagee has brought suit on a debt he may begin foreclosure only if 

Back 25

he has judgment on teh debt and the judgment is unpaid.

Front 26

How does one create a mortgage?

Back 26

A mortgage is the conveyance of a security interest in lan intended by the parties to be collateral for the repayment of a debt. It is the merger of:

 

1. debt

2. voluntary transfer of a security intrest in debtor's land to secure the debt

Front 27

What are names for legal mortgage?

Back 27

 

legal mortgage

The mortgage deed 

The note

Security Interest in Land

Front 28

In an equitable mortgage, what if the creditor proeeds to sell Blackacrew to bona fide purchaser X?

Back 28

X owns the land. O's only recourse is to proeed against creditor for fraud and the sale proceeds.

Front 29

Once a mortgage has been created what are the partie's rigths to the land?

Back 29

Mortgagor- title and right of posesssion until foreclosure

 

Mortgagee- a lien.

Front 30

A mortgagee can transfer his interest by:

Back 30

1. endorsing the note AND delivering it to transferee

 

OR

 

3. executing a separate docuemtn of assignment

Front 31

Holder in Due Course

Back 31

When a mortgagee transfers his interest by endorsing the note AND delivering it to transferee.

Front 32

What are a Holder in Due Course's rights?

Back 32

He takes the mortgage free of any personal defenses that could have been raised against the original creditor. He may foreclose despite the existence of the defenses.

Front 33

What are personal defenses that cannot be brought against a Holder in Due Course?

Back 33

lack of consideration

fraud in teh inducement

unconscionability

waiver

estoppel

ordinary breach of contract defenses

Front 34

What defenses will the holder in due course still be subject to?

Back 34

MAD FIFI4, the Real Defenses

 

Material Alteration

Durress

Fraud in the Factum

Incapcity

Illegality

Infancy

Insolvency

Front 35

Fraud in the Factum

Back 35

A lie about instrument;

 

told you you were signing a credit applicaiton but really you were sigining a mortgage.

Front 36

Holder in due course of note criteria

Back 36

1. note must be negotiable, made payable to name mortgagee

2. original note must be indorsed, signed by named mortagee

3. original note must be dleivered to transferee, not a photocopy.

4.transferee must take note in good faith, without notice of illegality

5. transferee must pay value-- not nominal- for note.

Front 37

Effect of mortgagor selling Blackacre, which is now mortgaged?

Back 37

Lien remains on teh land so long as the mortgage instrument was properly recorded.

Front 38

Who is personally liable on the debt if O, mortgagor, sells Blackacre to B?

Back 38

It depends on whether B assumed the mortgage or took subject to the mortgage.

Front 39

Assumed the Mortgage

Back 39

The transferee becomes the primary obligor, the original mortgagor is liable only secondarily.

Front 40

Assumed the Mortgage Requirements

Back 40

Requires that party assuming the debt execute and acknowledge:

 

1) a writing stating that she assumes and agrees to pay the mortgage debt

2) the amount of debt

3) a deed reciting the assumption of debt and amount of debt

Front 41

What effect if mortgagee and transferee who assumed mortgage modify the obligation by agreement?

Back 41

Completely discharges the original mortgagor.

Front 42

Who is personally liable on teh debt if O, mortgagor, sells Blackacre to B who assumed the mortgage?

Back 42

Both O and B are liable. 

 

B is primary. O is secondary.

Front 43

Subject to Mortgage

Back 43

If subject to mortgage the property becomes primary source for payment of the debt, the original mortgagor conitnues to be liable on bond.

Front 44

What effect if mortgagee and transferee who takes subject to the mortgage modify the obligation by agreement?

Back 44

The original mortgagor is discharged from his suretyship.

Front 45

Who is personally liable on teh debt if O, mortgagor, sells Blackacre to B who takes subject to the mortgage?

Back 45

Only O.

 

B assumes no personal liability.

Front 46

What if the proceeds from a foreclosure sale are less than the amount owed?

Back 46

The mortgagee must bring a deficiency judgment against the debtor within 90 days.

Front 47

What if the proceeds from a foreclosure sale are greater than the amount owed?

Back 47

Junior liens are paid off in order of priority

remaining surplus goes to tdebtor

Front 48

What efefct if a necessary party is not included in a foreclosure action?

Back 48

The party's claim is preserved despited foreclosure.

Front 49

What is the liability of the buyer at a foreclosure sale?

Back 49

he is not personally liable, but if the last owner or his nominee purchase property at the sale, junior liens on the property cut off by teh foreclosure action are revived.

Front 50

If a junior interest mortgage forecloses, what effect?

Back 50

No affect on senior interests, they will continue on land.

 

Junior interests will be paid. 

 

Buyer will take subject to the senior interest, thus should pay FMV-senior interest.

Front 51

Purchase money mortgage

Back 51

A mortgage given to secure a loan that enables the debtor to acquire the encumbered land.

Front 52

What priority does a purchase money mortgagee have?

Back 52

superior to all other interests in land it finances

Front 53

After Acquired Collateral Clause

Back 53

"Whether now owned or herafer acquired"

 

Permissible.

Front 54

Subordination Agreement

Back 54

Sr. Creditor may agree to subordinate its priority to a junior creditor.

Front 55

Redeption in Equity

Back 55

Recognized up to the date of sale when the mortgageor pays off the missed payment(s), interest, costs.

 

At any time prior ot the foreclosure sale, the debtor has a right to redeem the land and free it of the mortgage.

Front 56

When does Redeption in Equity period end?

Back 56

Once a valid foreclusre has taken place.

Front 57

Acceleration Clause

Back 57

Balance in full, interest, costs.

Front 58

Is equitable redemtion waivable?

Back 58

No. 

 

Known as clossing of teh equity of redemption, and prohibited.

Front 59

Statutorty Redemption

Back 59

Not recognized in NY.

 

Gives the mortgagor a statutory right to rdeem for some fixed period AFTER the foreclosure.

 

Usually the foreclosure sale amount, not the original debt.

 

Mortgagor can possess land during period.

Front 60

Effect of statutory redemption?

Back 60

undo's the foreclosure sale,

redeemign owner is restored to title

Front 61

Basic rule in absence of recording

Back 61

priority is first in time, first in right EXCEPT

 

bona fide purchaser has priority over an equitable mortgage.

Front 62

Judgment creditor priority

Back 62

A docketed lien of a judgment creditor is

 

superior to subsequent mortgages whether or not recorded BUT

 

inferior to prior mortgages whether or not recorded

Front 63

Mechanic's Liens priority

Back 63

inferior to subsequently recorde dmortgage, to the extent advances of the mortgage made prior to the mechanics' lien IF

 

mortgage includes a provision reciting payments under it subject to trust fund provisions of the Lien Law.

Front 64

Lien Law

Back 64

protects against granting of collusive mortgages,

voids mortgae taken by a contractor when teh mechanics' lienors already possess claims against the property.

 

IF give prior to existence of any such claims, valid (if good faith)

Front 65

Buliding Loan priority

Back 65

inferior to properly filed mechanics lien if the buliding loan contract is not timely filed.

Front 66

Statute of Limitations applicable to bond or note secured by a mortgage

Back 66

6 years

Front 67

What is effect of part payment of indebtedness secured by the mortgage

Back 67

revives both the SoL on the debt and the right to forelose on the mortgage.

Front 68

Mortgages junior to the one being foreclosed are __________ by foreclosure, and thus a junior mortgagee __________.

Back 68

extinguished

 

is a necessary party to the foreclosure action

Front 69

When a mortgagor conveys mortgaged property, a grantee who assumes the mortgage is __________ liable to the lender.

Back 69

primarily

Front 70

Equitable redemption is the right of a mortgagor to recover the land at any time before the foreclosure sale, by paying __________.

Back 70

the amount due on the mortgage plus interest and costs

Front 71

A due-on-sale clause:

Back 71

permits the mortgagee to demand full paymetn of a mortgage det if teh mortgagor transfers her interst without the lender's consent.

Front 72

Mortgages senior to the one being foreclosed are __________ by the foreclosure, and thus a senior mortgagee __________.

Back 72

not affected; maintains its lien on the property after the sale

Front 73

As between two mortgages, what is the effect on the junior mortgage when the mortgagor agrees to an increased interest rate on the senior mortgage?

Back 73

The junior mortgage is given priority over any increase in the senior mortgage debt

Front 74

If a grantor transfers a deed in exchange for cash, and the grantee promises to return the land when the cash is repaid, a court will likely treat the transaction as:

Back 74

equitable mortgage

Front 75

May the vendor of an installment land contract containing a forfeiture clause reinstate strict performance once she has waived it?

Back 75

Yes, by giving the purchaser notice and a reasonable time to catch up on payments

Front 76

When may a mortgagee take possession of the mortgaged property?

Back 76

On default in a title theory state.

Front 77

Statutory redemption is the right of a mortgagor to recover the land after the foreclosure sale has occurred, usually by paying __________.

Back 77

the foreclosure price

Front 78

If an installment land contract provides that the debtor forfeits her interest in the property on default, and the vendor sends notice that he is electing the forfeiture remedy, what other remedies exist?

Back 78

None.

Front 79

Sale leaseback

Back 79

security interest in land where the debtor transfers title to land to a lender in exchange for a lease with an option to repurchase

Front 80

If a debtor deeds land to her creditor, when is a court unlikely to treat the transaction as a security interest in land?

Back 80

The creditor agrees to accept the land as payment in full for the loan.

Front 81

“Power of sale” provisions generally apply to what type of security interest in land?

Back 81

Deeds of trust

Front 82

Deeds of trust

Back 82

A security interest in land by which the debtor (i.e., the trustor) transfers title to the land to a third party (i.e., the trustee), such as the lender’s lawyer or a title insurance company, acting on behalf of the lender (i.e., the beneficiary). 

Front 83

In Lien Theory, what effect if a joint tenant mortgages their interest?

Back 83

It does not sever the interest.

Front 84

In Title Theory, what effect if a joint tenant mortgages their interest?

Back 84

severs.

Front 85

Where mortgagor joint tenant dies before the mortgage is paid off, the mortgage is 

Back 85

wiped off the books, the interest is over and by right of survivorship the survigin joint tenants take interst. Mortgagee must go after tenant estate.