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10 Cards in this Set
- Front
- Back
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When can discharge occur?
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1) at prepayment (if allowed)
2) upon the last mortgage payment 3) upon acceleration and payment of debt 4) at the end of the balloon. |
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What two kinds of people can make pay-offs of the debt?
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1) primarily responsible: the owner of the equity of redemption (MR or G)
o when the party primarily responsible pays, the mortgage is extinguished 2) not primarily responsible: those with interests to protect can buy mortgages o when a party not primarily responsible pays, the mortgage is not extinguished but that person becomes subrogated to the mortgage, as if the mortgage has just been sold to a different owner who can then receive payments from the primarily responsible party o then when the primarily responsible party pays the non-primarily responsible party, the mortgage evaporates |
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Does actual payment have to occur before the mortgage disappears?
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No, valid tender also counts.
Valid tender: an offer to pay the full amount and keep the tender good by making sure cash is paid into escrow. |
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What are required for mortgage to be extinguished by the PR party?
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1) Redemption can be made only when paymewnt is due or earlier if allowed by ME.
2) Payment must be in full. 3) Payment has to be actually received |
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What is the ME required to do after MR/G who is PR redeems?
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To give payor a written document in recordable form, showing that the mortgage has been extinguished.
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What are required for mortgage to be extinguished by the NPR party?
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1) Can only redeem when payment is due (maturity of debt or acceleration)
2) Prepayment not permitted even if ME would allow it 3) NPR party also entitled to the written document showing that the mortgage has been assigned. |
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What is the general/common rule on the right of prepayment?
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If a mortgage note is silent as to prepayment, there is no right to prepay
Brown v. Cole |
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What is the lock-in provision of many commercial loans?
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A provision prohibiting prepayment prior to a certain date.
The outcome of this is that if the MR decides to prepay, the lender can name the price. |
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What is a defeasance provision?
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Some lock-in provisions have a defeasance provision which makes the real estate more marketable because it says that if the MR can substitute other security of comparable value, the mortgage will be put on the new security and the former security will be released.
The new security generally has to be something reliable, like treasury bills. The Restatement allows for this even in the absence of a defeasance provision. |
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What is the restatement view on the right to prepay?
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If the mortgage is silent, there is a right to prepay at any time, under the theory that if the lender thinks it is important, the lender can put in specific language disallowing prepayment.
Mahoney v. Furches |
