CHAPTER TWO FINANCING: NOTES AND MORTGAGES

Chapter Objectives Define the mortgage note Define and explain the mortgage Identify the different mortgage clauses Explain and identify what constitutes mortgage default and foreclosure

Chapter Objectives Continued Identify and explain alternatives to foreclosure Define and explain bankruptcy

Essential Elements of the Mortgage Note Amount borrowed Rate of interest Payment amount, due date, and term Maturity date Reference to the mortgage Default Penalties for late payment

Essential Elements of the Mortgage Note Continued Acceleration Clause Recourse vs. Non- Recourse Assumability Alienation Clause Future Advances Release of Lien

The Mortgage Instrument Mortgagor and Mortgagee Promissory Note Pledge of property as security Obligation to pay

Basic Mortgage Requirements Borrower and Lender Property Description Covenants of Warranty Provision between spouses Covenants and other contractual agreements

Mortgage Clauses Impound Accounts Taxes and Insurance Taxes and other assessments Hazard Insurance

Mortgage Clauses Continued Maintenance Alienation Subordination

Mortgages- Other Characteristics “Subject to” a mortgage Mortgage Assumption Junior Mortgage Purchase Money Mortgage Trust deeds Land contracts

Mortgage Default and Foreclosure Breach of the mortgage contract and note Alternatives to foreclosure Restructuring the loan Transfer to a new owner

Mortgage Default and Foreclosure Continued Voluntary conveyance to the lender A “Friendly Foreclosure” Extension Agreement Deed in lieu of foreclosure Judicial Foreclosure

Mortgage Default and Foreclosure Continued Non- Judicial Foreclosure Equity of Redemption Statutory Redemption Junior liens are extinguished Deficiency judgment

Trust Deeds A three party instrument Trustor- borrower Trustee- third party Beneficiary- lender

Bankruptcy Chapter 7- straight bankruptcy Chapter 11- business owners Chapter 13- plan of reorganization