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32 Cards in this Set
- Front
- Back
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What is a mortgage?
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Conveyance of a security interest in LAND as collateral for the repayment of a debt
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2 requirements for a mortgage
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1) debt
2) voluntary lien in debtor's land to secure the debt |
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Do mortgages have to be in writing?
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Yes, for a LEGAL mortgage to satisfy the statute of frauds
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What is an equitable mortgage?
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owner/mortgagor gives creditor/mortagee absolute deed to property
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O owns land. Creditor lends O $ using land as collateral. O gives Creditor note with deed to land. O sells land to X, a BFP. Who owns the land?
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X
O can only sue Creditor for fraud and get a part of the proceeds |
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Until foreclosure, the debtor/mortgagor has
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title and possession
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Until foreclosure, the creditor/mortagee has
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a lien
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Can the parties to a mortgage transfer their interests?
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Yes!
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How can a creditor-mortgagee transfer his interest?
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1) endorse the note and deliver it to transferee
2) execute a separate document of assignment |
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After a note is endorsed and delivered, the transferee becomes
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a HOLDER IN DUE COURSE -- takes from of ANY PERSONAL defenses (lack of consideration, fraud, waiver, estoppel)
but still SUBJECT to REAL defenses |
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What are real defenses?
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MAD FIFI4
Material Alteration Duress Fraud in a Factum (lie about instrument) Incapacity Illegality Infancy Insolvancy |
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In order to be a holder in due course, what requirements must be met?
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1) not must be negotiable - made payable to named mortgagee/creditor
2) original note must be indorsed/signed by mortgagee 3) transferee must take in good faith; w/o notice of illegality 4) ORIGINAL note must be delivered (no photocopy) 5) transferee must pay VALUE for the note |
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Do mortgages run with the land?
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Yes, if properly recorded.
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Must a buyer have actual notice of the mortgage?
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No, as long as the mortgage was properly recorded.
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M takes out $50k mortgage on land with Bank. M sells land to O who doesn't know about lien. Bank then records mortgage. Then O records. Does O hold subject to Bank's mortgage?
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1) race-notice: Subject to mortgage because Bank recorded first
2) notice (VA): NOT subject to mortgage so long as he was a BFP when he took |
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O has mortgage with Bank. O sells to B. Who is liable to Bank?
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1) if B assumed the mortgage: both O and B (B = primary; O = secondary)
2) if B takes subject to mortgage: only O BUT if recorded, mortgage runs with land so Bank can still foreclose on property |
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How does foreclosure work?
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by proper judicial auction; land is sold and proceeds go to satisfying the debt
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What if proceeds of foreclosure sale don't cover debt?
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Mortagee brings deficiency action against debtor
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What if the proceeds create a surplus?
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Junior liens are paid in order of priority; surplus goes to debtor
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What fees are taken off the top?
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attorneys fees, foreclosure expenses, accrued interest
THEN goes to pay off debt in order of priority |
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Does foreclosure effect junior or senior interests?
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Junior only; will be paid off if there are left over funds
AFTER foreclosure --> can't look to land for satisfaction |
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Those with interests subordinate to foreclosure party are
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NECESSARY PARTIES to the foreclosure action and MUST be joined; otherwise, mortgage stays with land
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The buyer at a mortgage auction takes subject to
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any interest senior to the mortgage: not LIABLE for debt, but land could still be foreclosed
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Land has value of $50k subject to 3 mortgages: B1 = $30k; B2 = $15k; B3 = $10k. B2's mortage is being foreclosed. What happens?
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B1 mortage not effected; buyer takes subject to that
B3 mortgage will be paid off using proceeds of sale |
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As a creditor, the first thing you must do is
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Record!
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When multiple recordings, priority is determined by
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who recorded first
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What is a purchase money mortgage?
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Mortgage given to secure a lone that enables debtor to acquire the encumbered land
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A purchase money mortgagee has priority
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over all others! Including those that have security interest in all of O's real estate holdings
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Can a senior creditor voluntarily subordinate his interest to a junior creditor?
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Yes
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What is redemption in equity?
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Any time PRIOR to foreclosure, debtor can try to redeem the land by making up MISSED PAYMENTS + INTEREST + COSTS
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what is an acceleration clause?
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allows mortgagee to declare full balance due at time of default
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May debtor/mortgagor waive redemption rights?
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No!
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