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New York Bar Exam - Mortgages


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What is mortgage?
Any conveyance of land intended by the parties at the time of the making to be security for the payment.
What is the statute of frauds for a mortgage?
To be enforceable, a mortgage must be in writting and signed by the mortgagor or an agent.
What is an equitable mortgage?
Certain security transactions in land that do not satisfy the requirements of legal mortgages may still be enforceable as equitable mortgages.
What is the priorty for an equitable mortgage?
An equitable mortgage is entitled to preference over subsequent judgment creditors, but will be cut off by a bona fide purchaser.
When well a deed conveyancing property be construed as a mortgage?
If there is any written instrument that makes it appear that the legal deed was intended to create a mortgage.

**Even in the absence of such other written instrument, a mortgagor may prove that there was such an intention via parole evidence.
What may a mortgage secure?
Any existing monetary obligation or obligation capable of being reduced to equivalent.

**Includes preexisting debts and debts to one other than the mortgagro
Can a mortgage secure advances to be made in the future?
What property is subject to a mortgage?
Any transferable interest in real property may be mortgage.

**Fee simple, life estate, ones spouse in a tenancy.
What defenses are applicable to a mortgage?
A mortgage is subject to the same kind of defenses ar are available againtst assertion of the underlying obligation that the mortgage secures.

**An action for foreclosure may be sustained even though the note is illlegal or tainted by fraud.
What is the defense of usury?
In New York, usury serves as a defense available against actions both for principal and for interest if the mortgagor is not a corporation.

**Usury laws prevent charing of really high interest rates
What is the outcome of a conflict between the note and the mortgage?
The provisions of the note control.
What are the rights of the mortgagee (lender) to the land?
A mortgagee merely has a lien, and is not automaticall entitled to possession.

**May take possession until the debt is paid if mortgagor gives express or implied consent.
What are the rights of the mortgagor (borrower) to the land?
The mortgagor has right to possession until for foreclosure.
What are the duties of the mortgagor (borrower) to the land?
May not commit waste or in any way impair the value of the property.
Is notice a mortgage necessary to bind a recording purchaser of property?
Yes, the mortgaee must record or risk losing his lien if an assignee of property records.
Can the mortgagee make transfers?
Transfer of a mortgage and note may be effected by delivery.
Can you assign the mortgage without the note?
No, because the mortgage is collateral to the note. Such an assignment will be void.
What is the effect if the mortgagor transfers the property subject to the mortgage?
If mortgaged property is transferred “subject to the mortgage,” the property becomes the primary source for payment of the debt; the original mortgagor continues to be liable on the bond.
What is the effect if the mortgagor transfers the property and the transferee assumes the mortgage?
If property subject to a mortgage is transferred to one who assumes the mortgage, the transferee becomes the primary obligor; the original mortgagor is liable only secondarily.
What does assumption of the mortgage require?
Requires that the party assuming the mortgage execute and acknowledge
1) a writing stating that she assumes and agrees to pay the mortgage debt and stating the amount of the debt or
2) a deed reciting the assumption of debt and the amount of the debt.

**Assumption does not relieve the original mortgagor of his obligation on the bond
What is the effect of a transfer from the mortgagor to the mortgagee?
If the value of the property is equal to the remaining debt secured by the mortgage, the conveyance satisfies the bond and mortgage.
What is the effect of transfer of property upon the death of a mortgagor?
If a decedent’s property is encumbered by a mortgage, the beneficiary takes it subject to the mortgage.
What is a due on sale clause?
A mortgage provision stating that the principal becomes due at the mortgagee’s option in the event of a sale or conveyance is enforceable.
What are the mortgagees remedies when the mortgage debt is due and unpaid?
The mortgagee may either sue on the debt or foreclose the mortgage.
Can a mortgagee bring a foreclosure action if has alread sued on the debt?
By statute, the mortgagee who has brought suit on the debt may begin the foreclosure action only if he has a judgment on the debt and that judgment is unpaid.
What is a judicial foreclosure action?
An action brought by a mortgagee to foreclose the exercise of what is otherwise the equitable right of the mortgagor—to redeem the property from the mortgagee by tendering payment.

**The mortgagor retains this right until the moment of sale pursuant to a judgment of foreclosure.
What is the requirement to bring a foreclosure action?
A foreclosure action may be brought upon any default on payment of the debt that the mortgage secures.
Are acceleration clauses valid?
If the parties so agree, nonpayment of principal or interest can effect an acceleration of the debt so that the entire principal becomes due.
When is foreclosure prohibited?
A foreclosure is prohibited if:
1) the mortgage was secured to pay for legalfees in a matrimonial action,
2) it is on the mortgagor’s primary residence, and
3) the mortgagor remains the titleholder.
What is the effect of a foreclosure sale?
It is the sale, and not the judgment, that extinguishes all subordinate interests of persons included as defendants in the foreclosure proceedings.
What title does a purchaser at foreclosure sale take?
The purchaser at a foreclosure sale acquires a title clear of any claim of the parties to the foreclosure action—a title that reverts back to the date of the mortgage, cutting off any intervening rights. The mortgagee
What is a deficiency judgement?
If sale proceeds are less than the judgment in the foreclosure action, and if the mortgagor was personally served in the foreclosure action, the mortgagee can ask the court for a defi ciency judgment. Demand for such judgment must be made within 90 days of sale.
When must demand for a deficiency judgment be made?
Demand for such judgment must be made within 90 days of sale.
Is there a right of redemption in NY?
In New York, there is only an equitable right of redemption prior to sale; there is no statu tory right of redemption after sale regardless of who buys at the sale.
When is it possible for the mortgagee to foreclose by advertisement?
It is possible for the mortgagee to foreclose the equity of redemption without recourse to judicial action if:
1) the mortgage contains a power of sale;
2) default has occurred which under the mortgage gives the mortgagee the power of sale; 3) no action has been brought on the debt;
4) the mortgage is recorded; and
5) the first “advertisement” is made within the limitation period for judicial foreclosure.

**The mortgagee must advertise at least once each week for 12 weeks
What are the basic priority rules in absence of recording?
1) Priority in time is priority in right except that
2) a subsequent legal mortgage that is accepted in good faith, without notice, and for value will have priority over a prior equitable mortgage.
How does the recording act affect priority?
1) A purchase money mortgage has priority over other mortgages recorded at the same time,
2) A mortgage securing antecedent debt is valid, but mortgagee is not a purchaser for value (ie, rights will inferior to prior unrecorded mortgage even if recorded first)
What is the priority of a judgement creditor?
A docketed lien of a judgment creditor is superior to subsequent mortgages whether or not recorded, but is inferior to prior mortgages whether or not recorded.

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