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?
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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?
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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?
- Yes.
- What property is subject to a mortgage?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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.