Ch21: Foreclosure Flashcards
(26 cards)
Lien theory state
The mortgagee/lender cannot take possession prior to foreclosure b/c a lender has a lien until foreclosure is complete
Title theory state
The lender has the right, as holder of the title, to take possession of the property at any time
Intermediate title theory state
The mortgagor retains title until default; at which point the lender can take possession
Waste
a homeowner cannot commit waste that will impair the lender’s security interest
Equity of redemption
A common law right held by the mortgagor to reclaim title and prevent foreclosure upon the full payment of the debt; mortgagor must exercise this right before the foreclosure sale
Deed in lieu of foreclosure
Rather than face foreclosure, the mortgagor can convey the property to the lender in exchange for releasing her from any outstanding debt
Clogging the equity of redemption
To “clog” is to create terms that make it harder for a borrower to exercise her equity of redemption (courts will intervene to stop this)
Foreclosure
a forced sale of an asset to pay off a debt
Notice of a foreclosure
the mortgagee must give notice before foreclosing
Two methods of foreclosure
- Judicial sale: sale under the supervision of a court
- Power of sale (private sale): sale held by the mortgagee/lender
Excess proceeds of a foreclosure will be used to?
satisfy other creditors
Is the mortgagor responsible if the sale produces less than the mortgagor owes?
Yes. In that situation, the court can issue a deficiency judgment for the remaining balance
Senior interests
interests acquired before the interest that is being foreclosed; they survive the foreclosureJ
Junior interests
Interests acquired after the interest that is being foreclosed; they are extinguished by the foreclosure
First in time rule
Surviving debts are satisfied chronologically
Purchase money mortgage exception
The purchase money mortgage has priority over mortgages and liens created by or against the purchaser/mortgagor prior to the purchaser/mortgagor’s acquisition of the property
Recording act exception
A senior mortgage may sometimes not get recorded; a junior mortgage that satisfies the requirements of the state recording act may take priority over the unrecorded senior mortgage
Subordination agreement b/w mortgages
A senior mortgagee can agree to subordinate its interest to a junior interest
Mortgage modifications
A senior mortgagee who enters into an agreement with the mortgagor/landowner to modify the mortgage by making it more burdensome subordinates its interest, but only as to the modification. The original mortgage will otherwise remain superior.
After acquired property
A mortgagor/borrower may grant a mortgagee/lender rights to property that the mortgagor/borrower acquires in the future (the mortgage must clearly state this)
Foreclosure _______ the mortgagors interest in the property
eliminates
What is the exception to the foreclosure eliminating the mortgagors interest?
Statutory redemption:
- some states allow the mortgagor to redeem the property even after the foreclosure sale
- Statute enables the homeowner to nullify the foreclosure
The purchaser of property at a foreclosure sale usually takes the property _____ and _____ of any junior mortgage and subject to any senior mortgage
free ; clear
Purchasers in foreclosure sales might be subject to?
the mortgagors statutory right of redemption
