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14 Cards in this Set
- Front
- Back
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Definition of a Mortgage |
A security device used to secure repayment of a debt |
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What are the 2 components of a mortgage? |
A note & the mortgage. -The note is the borrower's promise to repay the loan/debt. -The mortgage is an instrument that provides security to the note. |
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What are the 2 types of mortgages? |
Purchase money mortgage & Future advance mortgage. -Purchase money mortgage: person takes out loan to purchase property. -Future advance mortgage: line of credit (second mortgage). |
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What are the Equitable Mortgages? (non-security device that operates like a security device) |
1. Deed of Trust 2. Installment land contract 3. Absolute deed 4. Conditional Sale and repurchase |
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Deed of Trust |
Operates like a mortgage but uses a trustee to hold title for the benefit of the lender. |
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Installment land contract |
Seller finances the purchase and buyer makes installment payments toward the purchase price; seller retains title until the buyer makes the final installment payment.
Traditionally, if the buyer breached, the seller would keep the installment payments and the property. Now states assist defaulting buyers in that some installment contracts are treated like mortgages, some get an equitable right of redemption, and some get restitution. |
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Absolute deed |
The mortgagor transfers the deed to the property instead of a mortgage.
-borrower must prove mortgage like agreement by clear and convincing evidence, parol evidence is admissible, and SOF does not bar oral evidence. |
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Conditional Sale and repurchase |
Owner sells property to lender who leases the property back to the owner in exchange for a loan. Lender gives the owner the option to repurchase after the loan is paid off. |
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Can a mortgagor transfer the property? If so, how? |
Yes: by deed(sale), by will, or by intestate succession. However the mortgagor will remain personally liable for the mortgage unless: 1) released by the lender; or 2) modification of the obligation by the lender occurs
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Define a Due-on-Sale clause |
A due-on-sale clause gives the lender the option to demand immediate full payment upon transfer. It is an acceleration clause that allows the lender to speed up the payment when the property is transferred. |
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Define a Due-on-encumbrance clause |
It is an acceleration clause that occurs when the mortgagor obtains a second mortgage or otherwise encumbers the property. |
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What happens when a subsequent transferee Assumes the Mortgage? |
The transferee assumes the mortgage and the mortgagor/borrower is secondarily liable for the mortgage. - both the original mortgagor and the transferee are liable on default. -- in most jx this does not need to be in writing. |
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What happens when a subsequent transferee takes a "subject to" mortgage? |
This transfer does not continue the liability of the transferee. -Note: this is the presumption if the deed is silent or ambiguous to the liability of the original borrower. |
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Can a bank transfer a note and not a mortgage? |
No, the rule is that the mortgage follows the note. If a mortgage is transferred without the note, the transfer is either considered void or it is presumed that the note transferred as well. |
