M & L
Terms
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- What theory does Virginia follow? Describe.q
- Lien theory. Bank has a lien. Title is conveyed to trustee.
- What is equity of redemption?
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The mortgagor and any inferior interest have the equitable right to pay the debt in full and prevent property from being sold at foreclosure.
Rights expire upon sale, assuming no defects in the sale. - What power does the DOT give?
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Trustee has power to sell the property upon default in order to satisfy debt secured by the DOT.
(avoid costs of court FC) - What happens to surplus proceeds upon FC sale where debtor is deceased?
- After trustee pays expenses and %5 commission, surplus funds go to payoff other creditors and then to heirs/devisees
- What is an equitable mortgage?
- A transfer of property with a disguised loan. Equity court enforces it as a mortgage.
- What are some liens that are similar to mortgages? Describe each
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vendor's lien - K for sale of land, vendor has equitable lien for any unpaid money. Best to reserve such in the deed.
vendee's lien - K for sale of land, vendee has equitable lien for deposit if K falls through
grantee's lien - vendor defaults, grantee has lien for the money paid towards purchase - What are the mortgagee's remedies, and SOL to be aware of?
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Foreclose - either judicial sale or trustee sale, deficiency judgment is need be
Contract action - sue in court on the obligation
SOL - 3 year oral K, 5 written, and 10 for FC (if you wait 6 years, can't sue in court, but can still FC!)
- What is an after acquired property clause, and what's it significance?
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Clause in mortgage that says mortgagor is pledging property as security for x amount, and any possible future advances until to x amount.
It's significance is in the priority as against other intervening creditors. The later borrowed amounts still have initial borrowing priority, UNLESS later amounts were dispersed by mortgagee w/ ACTUAL KNOWLEDGE (not constructive) of the intervening creditors. - What are the mortgagor and mortgagee's rights/duties w/ respect to taxes on the property?
- Mortgagor pays, unless agreed otherwise. If not paid, mortgagee can pay and tack onto debt.
- A sells Blackacre to B for 10K. B pays A 1K and gives A a purchase money DOT. A does not record. Who can A prevail over in priority?
- Purchase Money DOT, regardless of recording status, will prevail over any of B's prior judgment creditors. However, subsequent creditors and BFPs would be in priority over A, therefore A must record to stay in priority going forward.
- Mortgagee dies. What passes to who?
- Mortgagee really owns a "claim to a certain sum" of money, and the PR is entitled to enforce such a claim. This can be passed on by PR to mortgagee's heirs.
- For liability purposes, what's the difference between "assuming" a mortgage, and taking title "subject to" mortgage?
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Assumption means partying assuming becomes liable for the debt, AS WELL AS original mortgagor.
Subject to simply means new party has taken title to the property, subject to the mortgagee's outstanding claim on the property. Mortgagee can still go after ONLY original mortgagor.
Note: there's always the option of subrogation, which allows original mortgagor to be subrogated to mortgagee's rights and either FC or sue to get the money back they're required to pay on behalf of the party that assumed or took subject to the outstanding debt. - What is the right of "marshalling"
- A owns 4 lots and takes out a mortgage on all four with Bank. A then sells 2 of the lots to P. When A doesn't pay mortgage, Bank forecloses, P can force Bank to foreclose on the other 2 lots first.
- In the assignment of mortgage situation, what follows what?
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A valid assignment of the debt (allonge), carried the mortgage with it in eduity. "Mortgage follows the Note"
In VA, AOM carries debt w/ it too. - If mortgagee assigns note/mortgage, what rights does debtor have to raise personal defenses against assignee?
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Depends on whether instrument is negotiable or non-negotiable.
Negotiable - takes subject to all defenses mortgagor had against mortgagee
Non-negotiable - HDC takes free from any defenses available to mortgagor against mortgagee - What is considered a formal release of DOT?
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Either a "deed of release" executed and filed in public record, or a "certificate of satisfaction" filed with clerk of court w/ the canceled note, bond, etc., or affidavit stating why it cannot be turned in to the clerk.
(this prevent fraud where banks attempt to release mortgages after the note was already assigned to another bank)