Securities Interest In Real Estate

Front 1

mortgage

Back 1

debtor/notemaker = mortgagor
lender = mortgagee
on default, the lender can realize the mortg'd real estate only by having a judicial foreclosure sale conducted by the sheriff

Front 2

deed of trust

Back 2

debtor/notemaker = trustor
he gives a deed of trust to a third party trustee, who is usually connected to the lender. On default, the lender instructs the trustee to foreclose the deed of trust by sale.

Front 3

Installment Land Contract

Back 3

an installment purchaser obtains legal title only when the full contract price has been paid off. Forfeiture clauses, allowing the vendor upon default to cancel the contract, retake possession, and retain all money paid are common.

Front 4

Absolute deed

Back 4

if given for security purposes can be treated by the court as an "equitable" mortgage to be treated as any other mortgage

Front 5

Sale- leaseback

Back 5

a landowner may sell her property for cash and then lease it back from the purchaser for a long period of time (can be treated as a disguised mortgage)

Front 6

Transfer of mortgage w/o notice

Back 6

some states, transfer of mortgage is transfer of note = equitable action..other states, mortgage and note have to be transfered = transfer w/o note is void

Front 7

Grantee take subject to mortgage- assumption

Back 7

assumption agreement- grantee become primarily liable to the lender, while the original mortgagor is secondarily liable as a surety

Front 8

assumption tip- once a grantee has assumed a mortgage, any modification of the obligation by the grantee and mortgagee discharges the original mortgagor of all liability

Back 8

assumption tip- once a grantee has assumed a mortgage, any modification of the obligation by the grantee and mortgagee discharges the original mortgagor of all liability

Front 9

Due on Sale Clause

Back 9

Allow the lender to demand full payment of the loan if the mortgagor transfer any interest in the prop w/o the lender's consent

Front 10

Lien Theory

Back 10

the morgagee is considered the holder of a security interest only and the mortgagor is deemed the owner of the land until foreclosure. The mortgagee may not have possession before foreclosure.

Front 11

title theory

Back 11

legal title is in the mortgagee until the mortgage has been satisfied or foreclosed, and the mortgagee is entitled to possession upon demand at any time.

Front 12

intermediate theory (lien & title)

Back 12

legal title is in mortgagor until default, and upon default, legal title is in the mortgagee. the mortgagee may demand possession when a default occurs. basically the same as title.

Front 13

Mortgagor consent and abandoment

Back 13

mortgagee may take possession if the mortgagor gives consent, or if the mortgagor abandons the property

Front 14

receiverships

Back 14

courts will appoint receivers for rental property upon showing: 1. waste is occuring 2. the value of the prop is inadequate to secure the debt 3. the mortgagor is insolvent

Front 15

foreclosure

Back 15

almost all states require foreclosure by sale, under which the prop is sold to satisfy the debt in whole or part...usually an auction, lender is permitted to bid

Front 16

redemption in equity

Back 16

at any time PRIOR to the foreclosure sale, the mortagor may redeem the property by paying the amount due. if the note or mortgage contains an acceleration clause, the full balance of the note or mortgage must be paid to redeem. this right cant be waived in the mortgage itself.

Front 17

statutory redemption

Back 17

allow the mortgagor to redeem the property for some fixed period (ie, six months) after the foreclosure sale has occurred

Front 18

PRIORITIES

Back 18

a mortgage's priority is usually determined by the TIME it was placed on the prop. foreclosure doesnt destroy any interests SENIOR to the interest being foreclosed. it generally destroys all JUNIOR interest,but failure to include a jr interest holder in a foreclosure action results in preservation of that party's interest

Front 19

Modification of PRIORITIES

Back 19

usually done chronologically, may be changed by: 1. the operation of the recording statute if a prior mortgagee fails to record 2. a subordination agreement between a sr and jr mortgagee 3. a purchase money mortgage 4. the modification of a sr mortgage (jr mortgage has priority over the modification) 5. granting of an optional future

Front 20

Purchase money mortgages

Back 20

mortgage given in exchange for funds used to purchase the prop. given either to the seller as part of the purchase price or to a 3d party lender. PMMs have priority over prior non-PMMs, even if such mortgages or liens are recorded first. However, subsequent mortgages or liens may defeat PMM priority by operation of the recording acts. seller's mortg has priority over a 3d party's. if two 3d party mortgs then done by chronological order.

Front 21

Proceeds of sale

Back 21

proceeds are applied first to the expenses of the sale, attorneys' fee, and court costs; then to the principal and accrued interest on the foreclosed loan; next to any other jr interests in the order of their priority; and finally to the mortgagor

Front 22

deficiency judgments

Back 22

if the proceeds are insufficient to satisfy the mortgage debt, the mortgagee retains a personal cause of action against the mortgagor for the deficiency

Front 23

installment land contracts

Back 23

provide for forfeiture rather than foreclosure as the vendor's remedy for default, but courts use equity of redemption, restitution, treat as a mortgage, waiver and election of remedies

Front 24

election of remedies

Back 24

vendor must choose only one remedy (damages or spec. performance) and forgo all others

Front 25

waiver

Back 25

a vendors pattern of accepting late payments = a waiver. to reinstate strict performance, vendor must send the purchaser a notice of his intention to do so and must allow a reasonable time for the purchaser to make up any late payments

Front 26

treat as a mortgage

Back 26

a few states treat installment contracts as mortgages, thus requiring a judicial foreclosure sale.

Front 27

restitution

Back 27

a number of decisions, while granting forfeiture, have required the vendor to refund to the purchaser any amount by which his payments exceed the vendor's damages

Front 28

equity of redemption

Back 28

give the contract purchaser a grace period to pay the accelerated full balance of the contract and keep the land after default