Mortgages Flashcards
Can a mortgage be legal?
Yes - provided it is a deed, which is on the face of it a deed, and is signed and witnessed by the appropriate parties.
What happens if a mortgage fails to comply with legal formalities?
It can exist as an equitable mortgage. Provided, it is in a contract, all terms are written down and it is signed by both parties.
How do mortgages take priority?
Legal vs Equitable = Legal takes priority, provided it is registered;
Legal vs Legal = The one that was created first and registered at any time;
Equitable vs Equitable = date of creation
What are the five remedies available to a mortgagee?
(i) Possession;
(ii) Power of sale;
(iii) Debt action;
(iv) Appointing a receiver;
(v) Foreclosure
When does the right of possession arise?
‘Before the ink is dry’. Lender can repossess whenever, but it is likely that the borrower needs to be in default for the lender to want to exercise their power.
Does a lender need a court order to exercise the power of possession?
No, but most lenders will obtain a court order anyways.
When will a court exercise its discretion to grant relief from possession? (Residential only)
Where the mortgagor can provide a detailed financial plan demonstrating that they can pay both the mortgage instalments as they fall due and any arrears.
When does the power of sale:
- exist;
- arise; and
- become exercisable?
(i) either expressly stated or implied into every legal mortgage;
(ii) arises when mortgage money is due;
(iii) is exercisable in one of the three ways:
(1) lender has given borrower notice to repay and 3 months have elapsed;
(2) interest is in arrears for 2 months after becoming due;
(3) borrower breached a term in the mortgage.
What are the lenders duties on sale?
(i) Act in good faith;
(ii) take reasonable care to obtain true market value of the property at the date of sale
To what extent can the lender recover debt from the borrower?
(i) 6 years recovery of interest;
(ii) 12 years recovery of capital.
When will a lender appoint a receiver?
When the property produces income, e.g. if let to tenants.
Will arise in the same way as the power of sale.
What are the two stages of foreclosure?
(i) Foreclosure Nisi - directing preparation of accounts of what is owed followed by a 6 month period to pay;
(ii) Foreclosure Absolute - vests title to the property in the lender, extinguishes the equity of redemption held by the borrower.
How is a borrower protected against foreclosure?
(a) discretion of the court to re-open foreclosure proceedings;
(b) where it is a dwelling house, borrower may seek to adjourn foreclosure proceedings;
(c) application to court for judicial sale, preserving the equity of redemption.
