Terms
Mortgage (in a lien theory jurisdiction)
a mortgage is a lien on the property that a loan recipient gives to a lender
Who can the lender sue for unpaid mortgage debt if a transferee of the property assumes the mortgage without a novation?
The Transferee is primarily liable
The Original Mortgagor is secondarily liable
When will a junior mortgage prevail over a senior mortgage?
when the senior mortgage has been modified in a way that materially prejudices the junior mortgagee.
when a loan is used to purchase real property and the collateral for the loan is the real property purchased
What are the two duties of the mortgagor?
pay off mortgage debt in a timely fashion and avoid waste
Who can the Lender sue for unpaid mortgage deb when a transferee of the property assumes the mortgage with a novation?
The transferee is now solely liable for lender
When will a junior mortgage be extinguished?
1. Junior Mortgagee is made a defendant in the foreclosure proceeding AND;
2. the junior mortgagee is given notice of the foreclosure sale AND;
3. there is a foreclosure sale!
What is a vendor purchase money mortgage?
when the vendor/seller of the real property is the lender of the loan used by the mortgagor to purchase that property.
What are the 2 duties of a Mortgagee (Lender)?
if there is a judicial foreclosure sale, it must be conducted:
1. in public with proper notice in a reasonable manner; AND
2. it must result in a reasonable price
Who is the mortgagee?
AKA Lender; gets/receives a lien the property
Who can the Lender sue for unpaid mortgage debt, if transferee of the property takes subject to the mortgage?
The original mortgagor
What does not materially prejudice junior mortgagee?
Extending Maturity Date or Rescheduling Payments.
what is the third party purchase-money mortgages?
when a person/entity other than the vendor/seller of the real property is the lender of the loan used by the mortgagor to purchase that property
WHAT ARE THE RIGHTS OF A MORTGAGOR in a lien theory jurisdiction?
LT: right of ownership and possession
Who has title to the property in a lien theory jurisdiction?
Mortgagor has title unless and until there is a foreclosure sale
What is the Inverse-Order-of- Alienation Doctrine?
The rule that controls when there is a default on the mortgage. Specifically, when a mortgage exists on a property and that property is subsequently subdivided and parceled out to others.
what are 3 examples of ways that materially prejudices the prejudices the junior mortgagee?
increase principal, increase interest rate and accelerate maturity date
what is an example of a 3rd party PMM?
a bank that does own the property being sold
what are the rights of the mortgagee?
1. right to timely receipt of debt payments
2. when a mortgagor is in default, a right to foreclose on the property and keep the proceeds of the foreclosure sale OR alternatively, right to accept the deed to the property in lieu of foreclosure
What is a novation in the mortgage context?
It is a three-way agreement between the lender, the original mortgagor, and the transferee who obtains the property whereby...
the lender allows the original mortgagor to walk away from all mortgage obligations and the transferee assumes all of the T's rights and obligations under the lease
How does the Inverse-Order-Of-Alienation Work?
If original mortgagor retains ownership of at least one of the parcels, lender must foreclose on those parcels first.
If a deficiency remains, the lender must then foreclose on that parcel most recently transferred/alienated.
*note: the parcel that was the first to be transferred/alienated would be the very last parcel to be foreclosed upon.
True or False: a junior mortgage can extinguish before a default on the senior mortgage?
False.
What is the general rule for purchase money mortgages?
What are the redemption rights of a mortgagor?
RR: equitable relief is not waivable but if statutory rights exists, it may be waivable &
equitable right is only exercisable before the foreclosure sale. If statutory right exists then it is only exercisable after the foreclosure sale