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Mortgages OutlineGeneral Info Concept of Mortgages: to secure the repayment of a loan. Mortgagor - debtor/borrower Mortgagee - lender Deed of Trust - mortgagor grants a title to the trustee so that, if mortgagor defaults, the trustee may sell the property in a non-judicial foreclosure sale o Judicial Foreclosure requires the debt to be proved up in court prior to foreclosure Must give notice to the debtor and inferior lienholders Must have a title interest to redeem o Non-Judicial Foreclosure allows foreclosure to take place w/o the courts permission beforehand Occurs pursuant to the deed of trust or statute Need only notify the debtors Selling the property cuts off the inferior lienholders Prior to selling, anyone w/ interest can pay off and redeem the debt Equitable Mortgage security implied, by the courts, for a debt Waste of Security not taking care of the property, thereby endangering the mortgagees security interest A suit to foreclose just says you have the right to foreclose, you still need to sell the property Liz pendent places the world on notice that the property is under dispute Writ of sequestration sheriff takes possession of land and holds it for the time of the trial Writ of attachment holding under an unsecured note, file a writ to attach the asset to the; must pay bond to payoff anyone who was harmed if you are incorrect 2 theories of Mortgages Title Theory - not be covered much on test, just know what is below o From Common Law o A title transfer with a right of redemption in favor of the mortgagor o The mortgage is a conveyance Mortgagor the one barrowing money and transfers title to the land to the mortgagee Land is transferred from mortgagor to mortgagee in a title event with the right in the mortgagor to redeem the property; or buy back - payor Mortgagee the person or entity who loans the mortgagor money and now holds title to the land as security for repayment - payee o Original Common Law if mortgagor did not pay the mortgagee according to terms, the original common law would destroy the right of redemption and the mortgagee had absolute right o Now: Strict Foreclosure Order: the right of the mortgagee to claim the absolute title because the extension of the chancorlee had surpassed Same result as original common law, but w/ an extension of time to pay off and redeem property Mortgagee goes to court to get a specific date when the mortgagor has no right of redemption Security Theory most states including TX o The mortgagor continues to be owner of the land and only gives a security for repayment of the debt to the mortgagee o The mortgagee loans money to the mortgagor and only takes a security interest in the land, not title receives only a means to enforce the debt o If the mortgagor fails to make proper payment or obligation of the mortgage, or defaults, the mortgagee must foreclose
Foreclosure requires sale of the property; mortgagee must sale the property at public outcry and submit the proceeds to the loan o 2 types of foreclosure: Judicial Foreclosure The mortgagee file suit for failure of payment, and request the court to find that there is a mortgage in favor of the mortgagee and to sale the property at public outcry, and Use the proceeds of the sale to pay for expenses and payment of the loan. Private Foreclosure or Deed of trust regulated by statute A deed of trust gives the mortgagee a private right of foreclosure Mortgagor transfers the land into a trust for purposes of foreclosure only; Trustee does nothing until mortgagee request; only thing trustee in deed of trust can do is execute a foreclosure. o If mortgagor follows all terms of K, then when mortgage is paid off the mortgagee releases the security interest in the land. The nature of the interest owned by the Mortgagor and the Mortgagee Beginning foreclosure does not increase the rights of the mortgagee, mortgagor still owns the land until it is Sold Mortgagor has full property rights so long as the property has not been sold in foreclosure; mortgagee only has security interest incase of unpaid debt, but must go through foreclosure process. Farmland Foreclosure: Willis Case o mortgagor sells unharnessed crops on land in which foreclosure process has started o Under the security theory, the crop belongs to the mortgagor and if he does not sever the crop before the sale, then it goes to the purchaser at the foreclosure sale. o If the crops have been severed by time of sell, then the crop goes to the person who owns them. severed either actually or constructively o Severance: Ways to sever: Actually Severed: Actually harvesting crop Constructively severing: sell the crop subject to the harvesting o If an ungathered crop has been constructively severed and the land is sold at a foreclosure sale, then the crop owner has the right to tend and harvest the crop. Emblements: o The right of a possessor of land, under an indefinite term, to go back onto the land and take care of and harvest growing annual crops even though the crop owner no longer has interest in the property o Must be annual crop o The right or interest in the land must be for an indefinite term: Lessees in an indefinite terms Life estate life tenant A lease for an indefinite term A Periodic Estate: This is an on going lease which automatically renews and requires notice to end Estate at will: This is a lease for an indefinite period, no ending date, and may be terminated at any time. Not an Estate for Years this is a lease for a specific amount of time and ends at a determined date
Mortgagor cannot have a emblement right against mortgagee, but it is possible for a lessee of the mortgagor to have an emblement right against the mortgagee Meaning after the foreclosure sale, the lessee still has the right to enter and tend to and harvest the crop against the owner who purchased at the foreclosure sale. o But usually a mortgage carries all additions to the land, a building will go w/ the new owner Rents collected during pending foreclosure - Case: McGeorge o Until actual sell, mortgagor owns the property as landlord and is entitled to the money from the rentals on the property. o Rents from the mortgagors lessees go to the mortagor, even during the pending foreclosure; Mortgagor gets all rents up until the actual sell o But, rents can be an additional security A provision in the mortgage can state that rent can be an addition security in the payment of the mortgage Rents as additional Security - Taylor Case (assignment of rents for security purposes or pledge of additional) o What does rents as additional security mean? You have a right to demand rents if you have proceeded properly Mortgagee is not automatically entitled to the rents; like throwing mortgagor off property o Ways in which the mortgagee can recover rents, Receivership - is most common way of receiving rents, a law suit seeking foreclosure of the mortgage & court appoints a receiver to collect and apply rents to the unpaid indebtedness, after foreclosure sale It is also possible to have a contractual agreement to appoint a receiver. To impound the rents take some contractual provisions beyond the clause, and occurs based on certain events Mortgagor gives up possession and mortgagee take over the possession for the purposes of protecting his security interest; mortgagor still owns the property. doesnt usually occur Assignment of rents for title purposes, or possible just assignment of rents o Assignment outright has an automatic entitlement to the assignee. o You will also have clauses on how they will be assigned payment for the mortgage Waste of the security means the mortgagor is not taking care of the security (property) and is endangering the interest of the mortgagee Notes: o w/o rents as additional security you cant appoint a receiver o In TX, a district court needs to appoint a receiver in an action by a mortgagee for the foreclosure of a mortgage and sale of the mortgaged property. 64.0001(a)(4)(c)(1)&(2) can only appoint a receiver if: mortgage property is in danger of being lost, removed, or materially injured- or the condition of the mortgage has not been performed and the property is probably insufficient to discharge the mortgage debt Executory Contracts; The Vendors Lien Executory Contracts A contract in which at least some material obligations have not yet been performed Vendors Lien a lien which for the purchase money Always in favor of seller, vendor and may be assigned to a 3rd party. Vendors lien arises in 2 ways: o Expressed o Implied Expressed Vendors Lien V. Lien reserved in K or deed of transfer: case below for docs sign at once!
Superior title comes w/ an expressed vendors lien Superior title means only that your (sellers) title is superior to the transferee (buyer) if the transferee fails to perform (pay) o Superior title gives the common law right that gives the vendor the right to rescind, o An expressed vendors lien gives the seller 2 possible remedies for the failure of payment: Rescission of the K allows the vendor to take back the property b/c of defualt Foreclosure property is sold and proceeds are to cover the debt owed Implied Vendors Lien o V. Lien is implied by C. Law if the deed states the purchase price, but is silent as to how the money is or will be paid this occurs when there is no expressed vendors lien You pay 500 down and 500 in 6 mths, I give you deed absolute on its face I get a vendors lien even though deed states nothing about lien or payments o Foreclosure is the only remedy o Must have superior title to rescind and Implied V. L. does not give the vendor superior title. Assignment and Rescission: o The assignee must have a transfer of superior title to have a right of rescission o In the assignment, the vendor need to expressly state the right of rescission to transfer that remedy Three ways to get rid of a Mor