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52 Cards in this Set

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  • Back
What is a mortgage?
is an interest in land created by a written instrument providing for the performance of a duty or the payment of a debt.
When do judgment liens attached?
Judgment becomes a lien on all real property held by the judgment debtor at the time the judgment is docketed

Note: first in time, first in right--when there are two or more judgment creditors

Note: where after-acquired property is obtained through seller financed purchase money deed of trust (or mortgage), the purchase money deed of trust will take priority over a judgment creditor with respect to proceeds from a sale and execution
When does a Mechanic's Lien attached?
Generally mechanic's liens will have priority over any mortgage recorded after the effective date of the mechanic's lien except a purchase money mortgage.

Note: purchase money deed of trust which has not been executed delivered and recorded in the same transaction will have priority over mechanic's lien.
What kind of recording statute does NC follow?
NC is a pure race recording statue
What is the general rule for priorities of mortgages for NC?
Mortgage will have priority over any subsequently recorded mortgage

Note: Exception--purchase money mortgage will have priority over any liens placed on the property

Note: Purchase money security interest perfected by a fixture filing within 10 days of filing will have priority ever existing pre-existing mortgage exception of a construction mortgage.
How is a judgment lien created?
Judgment creditor can have debtor's property sold under execution

Judgment lien may e obtained by
1. securing a judgment and
2. properly docketing the judgment with the clerk of superior court where the land is located
What is the statute of limitations of a judgment lien?
Judgment will expire 10 years after the time it was rendered. A sale and execution must be completed within this time.
What is a Mechanic; Laborers and Materialman's lien?
any person who performs or furnishes labor pursuant to contract, express or implied with the owner of real property for the making of an improvement has right to file a claim on the real property.
When is a materialman's lien effective?
lien is the date lienor began work, the lien will nto be filed to the completion but it will relate back to the date work began.
How do you perfect a Materialman's lien?
it is perfected by filing of lien in the office of the clerk of superior court.

Note: no later than 120 days after the last furnishing of labor or materials at the site of the improvement by person.
When can action to enforce the lien on real property?
no such action may be commenced later 180 days after last furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property

Note: Notice must be filed within the 180 day period failure to file will limit the lienor's remedy to money damages alone. Teh lienor will forfeit both any priority and the right to compel
What is a lien?
a lien is a claim, encumbrance or change on the property of another for payment of some debt, obligation or duty
What is the statute of limitations on foreclosures?
Both foreclosures by action and under power of sale are barred if the original defaulting buyer has ben in actual possession of the premises for 10 years after default or after the power of sale absolute or after the last payment toward the mortgage debt.
What is a deficiency judgment?
The lender may sue the defaulting original buyer for a deficiency judgment, for the difference between the total amount of indebtedness and the amount credited as a result of the foreclosure sale.
What are the defenses to deficiency judgments?
1. statute of limitations

(i) a suit for deficiency judgment must be brought within one year of submission of the final report or confirmation of a resale.

2. Seller-financed purchase money mortgage

(i) a seller of land who takes a purchase money mortgage may not pursue a deficiency judgment

3. inadequate sale price

(i) the original defaulting buyer may assert as a defense and offset that the amount bid by the lender was substantially less than the true value of the property, when the holder of the obligation takes title to the property after a foreclosure under power of sale and then sues for any deficiency

(ii) this defense is available only after sales pursuant power of sale, and not judicial foreclosure; is available only where the holder purchasers at the sale not against other purchaser; and is only a defense and offset, not a counterclaim.
What are the effects of a void sale?
If the court finds a foreclosure sale was invalid, the buyer may either have sale set aside, or sue for damages equal to the difference between the fair market value of the property and the amount received

Standard for voting a foreclosure sale: teh objecting party proves that there was a material and prejudicial irregularity in the sale.
What are the remedies and defenses for the original buyer in a foreclosure action?
1. Remedies
(a) original buyer may redeem the property by paying off the full balance before the sale

(b) Buyer may challenge the foreclosure in court

2. Original buyer's defense to foreclosure
(a) inadequate sale price
(b) fraud
(c) incapacity
(d) duress
What is the effect of foreclosure on other lienors?
1. purchaser at the foreclosure sale receives the same title held by the original defaulting buyer. The subsequent buyer takes the property subject to any senior liens and free of any junior liens

Note: in order for junior lien holder to protect their rights they must join the foreclosure.
What happens to junior liens when the original defaulting buyer buys the property?
If the original defaulting buyer buys the property at the foreclosure sale, junior liens will reattach.
What is the order of distriubtion of the proceeds in foreclosure?
1. costs and expenses of sale, including trustee's fees and auctioneer's fees, if any

2. taxes due and unpaid on the property

3. special assessments

4. obligation secured by the property
What is the notice requirement for the foreclosure sale?
Notice Requirement must be given by
(a) posting of the sale on the court house door not less than 20 days before the sale

(b) mailing notice to interested parties

(c) advertising the sale of the property at least once a week for 2 consecutive weeks in general circulatoin paper.
What is the Upset Bid and Equity of Redemption?
Buyer or any other party may submit an upset bid within 10 days o the sale

Note: the new bid must exceed the previous successful bid by at least 5% or $750.00 whichever is greater
Generally what is foreclosure by Power of Sale?
Mortgage or Deed of Trust Reservation of Right
i. if and only if, a mortgage or deed of trust expressly reserves the power of sale, a mortgage in default may be foreclosure without a formal judicial proceeding.
What is notice for a foreclosure by power of sale?
written notice to anyone obligated personally on the note
What type of notice is required before the hearing on a foreclosure by Power of Sale?
notice must be served not less than 10 days before the hearing

Notice may be given by posting notice on the property not less than 20 days before the hearing only if a necessary party has not been located after a diligent
What is a mortgage?
Mortgage is an interest in land created for the purpose of securing an obligation to be performed by the buyer or some other person. Upon satisfaction of the obligation.
Is North Carolina a lien or title theory jurisdiction?
In North Carolina a mortgagee does not receive a mere ''lien'' on mortgaged real property; rather, the mortgagee receives legal ''title'' to the land for security purposes. North Carolina is therefore considered a ''common law'' or ''title'' theory state with respect to mortgages
What is a deed of trust?
The buyer coveys the land to a 3rd party trustee to be held for the benefit of the creditor
What is the power of sale under deed of trust?
the mortgage instrument usually gives the trustee a power of sale allowing the trustee to sell the land and apply the proceeds to the debt in the event of default.
What is an Absolute Deed?
a grantor conveys title unconditionally, but makes a seperate agreeemnt with grantee to reconvey the property upon the satisfaction of some obligation.
What is the rule for oral agreements in regards to an absolute deed, as a mortgage?
If the agreement is oral, NC follows the minority rule that absent, fraud, undue influence mistake or ignorance proven by clear and convincing evidence parol evidence is not admissible to prove that the absolute deed was intended to be a mortgage securing the obligation.
What is the rule for contemporaneous written agreement and absolute deed?
grantor may convey land by absolute deed and contemporaneously execute a written agreement with agreement that the gratnee will reconvey upon performance of some condition.
What will the court look at if the contemporaneous writing is ambiguous?
1. the intent of the parties at the time of the agreement and these factors

(i) existence of a debtor-creditor relationship

(ii) the amount paid to the grantee relative to the value of the property

(iii) which party is in possession and

(iv) any financial distress of the grantor
What is rule in regards to parol evidence for absolute deed if the agreement is in writing?
where the collateral agreement is in written parol evidence is admissble to show that the conveyance was intended to be a mortgage, and only a preponderance of the evidence is required to prove the intention fo the parties
What is an installment land contract?
is an agreement whereby the buyer of land pays the purchase price to the seller in installments, usually over a period of several years.

Note: buyer may immediately take possession; the seller does not transfer title until the buyer pays the entire purchase price

Note: buyer could suffer severe hardship if he defaults late in the contract and thereby forfeits the majority of the pruchase price; a court coudl find an equitable mortgage and equity of redemption.
What are the requirements for a Deed of Trust?
name of all parties (mortgagor, lender and trustee)

2. description of property

3. granting clause

4. property acknowledge

Note: delivery--mortgage must be delivered and accepted similar to a deed

Note: recorded--in order to be valid against bona fide purchasers or creditors, the mortgage must be recorded in the county where the land lies.
What is equity of redemption?
the buyer may at time before a foreclosure is completed befor exiration of the upset bid period, pay the creditor the total amoutof the mortgage debt plus any accrued interest and costs to redeem title.
What is a purchase money mortgage?
is entered into in association with a loan made for the purpose of acquiring the property securing the mortgage.

Note: applies when bank lends money for the buyer to buy property from a 3rd party

Note: seller finance--the seller of the property to secure all or part of the property to secure all or part of the purchase price (seller is the creditor)

Note: seller/creditor cannot seek a deficiency judgment against the buyer after foreclosure

Note: a non purchase money mortgage occurs when an owner uses land to secure a loan or other obliation unrelated to the purchase of that land
What is the priority in regards of the purchase money mortgage?
purchase money mortgage will be superior to all liens incurred by the buyer, even if such liens were filed prior to the mortgage

Note: purchase money mortgage has priority only over liens against the buyer it is not superiro to any liens that may exist against the seller at the time mortgage is executed

Note: in order to have priority over previously recorded mechanics' liens against the buyer, the deed of conveyance and purchase money deed of trust must be delivered and recorded as part of the same transaction
In regards to mortgages, what is a future advance?
clauses in mortgages that secure future advances as well as the present debt are permissible

Note: mortgage must state that it secures future oblgiations (may not be greater than 15 years)
What is After-Acquired Property clause in mortgages?
after-acquired property clause may become subject to a pre-existing mortgage if the mortgage instrument so provides

Note: must be re-recorded, or a notice of extension is filed at the time that the buyer takes title to the after-acquired property

Must be clear and specific
NC an after acquired property clause is not efective to pass title to after-acquired property as against a lien creditor or a purchaser for valuable consideration until the instrument containing the clause has been reregisted following the acquistion the after-acquired property
Is the equity of redemption transferable?
buyer's equity of redemption is a transferable interest. The transfer of the buyer's interest, whether by sale, mortgage, lease or otherwise, does not relieve the buyer of any personal liability owed to the lender/creditor
What is assuming the mortgage?
mortgagor or the original buyer still remains personally liable for the debt. the original buyer becomes a surety for the grantee and is entitled indemnification from the gratnee for any amounts paid due to the grantee's default. If the lender agreed to novation the original buyer will be released.

Note: lender gives grnatee an extension--NC has enacted statutes protecting the orignal buyer after an assumption wehn the lender gives the grantee an extension of time or releases the grantee from liability; the original buyer is released from any further liability on the obligation

Note: if the lender releases any of the subject property from the deed of trust or motgage the buyer is released to the extent of the value of the property released.
What is transfer "subject to" the mortgage?
The grantee or subsequent may perofrm the mortgage obligations he is not personally liable

Note: if the lender subsequently gives the grantee a binding extension of time the buyer is released to the extent of the value of the property at the time of the extension of the agreement.

Note; if the lender releases any of the property from mortgage , the buyer is released from liability to the extent of the value of the property
What is a due-on-sale clause?
a type of acceleration clasue allowing the creditor to declare the entire debt and payable upon transfer of the buyer's interest
Can a buyer transfer transfer equity of redemption to the lender?
Yes, a buyer may transfer the equity of redemption to the lender subsequent to the execution of the mortgage.
When is there a discharge of the mortgage?
if the lender refuses to accept an unconditional tender of full payment, on or before the due date of the obligation, the mortgage is discharged although the obligation survives as an unsecured liability.
What are the general rules for residential properties under 100k prepayment?
on a home loan in a principal amount less than 100k a lender may not charge any prepayment penalty.
When is a mortgage presumed satisfied?
a mortgage will presumed satisfied only in favor of creditors and purchasers for value if 15 years have elapsed since the maturity date of the last installment.

Note: the presumption does not benefit those who become creditors or purchasers for value before the end of the period

Note: the holder of the indebtedness may obtain a single 15 year postponement of the presumption by filing an affidavty or instrument describing the amount or condition still unpaid or unsatisfied.
What are the methods of foreclosure?
1. foreclosure by action

2. foreclosure by power of sale
What is a foreclosure by judical action?
is a judicial procedure governed by case law.

Note: initiated by service of summons and complaint

Note: all parties with an interest in the property must be served and made parties to the action.
what is the right of appeal by foreclosure by sale?
any party may appeal the clerk's decision to the Superior Court within 10 days.