2011©Cengage Learning. All Rights Reserved.

Mortgages and Deeds of Trust 2011©Cengage Learning. All Rights Reserved.

SECURITY AND OBLIGATION Arises out of a loan of money. Security Separate from Obligation. A security cannot exist without a debt. 2011©Cengage Learning. All Rights Reserved.

Nature of Obligation anything capable of being reduced to monetary value may be secured by a lien. 2011©Cengage Learning. All Rights Reserved.

Promissory Note An unconditional written promise to pay someone a sum of money at a specified future date. Most notes are negotiable instruments. 2011©Cengage Learning. All Rights Reserved.

Classification of Notes Level Payment Notes Unequal Payment—Constant Reduction Unequal Payment—Adjustable Rate Loans Unequal Payment—Balloon Unequal Payment—Negative Amortization 2011©Cengage Learning. All Rights Reserved.

Deed of Trust a three-party security device by which the owner of property (trustor) transfers title in trust to a third party (trustee) to hold as security for the repayment of a debt to the lender (beneficiary). 2011©Cengage Learning. All Rights Reserved.

Mortgage A two-party instrument by which the lender (mortgagee) obtains a lien on the owner’s (mortgagor’s) property. Seldom used by lenders in California. 2011©Cengage Learning. All Rights Reserved.

COMMON CLAUSES Acceleration Clauses Default of Payment Clause Due-on-Sale Clause Due-on-Encumbrance Clause Assignment of Rents Clause Late Charges Clause 2011©Cengage Learning. All Rights Reserved.

COMMON CLAUSES Prepayment Clause Or-More Clause Prepayment Fees  Residential Loans  Governmental Loans 2011©Cengage Learning. All Rights Reserved.

Deed of Trust Types Wraparound Deeds of Trust Blanket Deed of Trust 2011©Cengage Learning. All Rights Reserved.

More Clauses Future Advances Clause Subordination Agreements 2011©Cengage Learning. All Rights Reserved.

Usury Consumer loans  Commercial loans  Unregulated loans. Institutional lenders Real estate brokers Purchase money loans.  Legislative regulation 2011©Cengage Learning. All Rights Reserved.

Effect of Usury The borrower is relieved from obligation to pay any future, unpaid interest. He needs only to repay the principal. The lender forfeits any & all future amounts of interest due under the loan. 2011©Cengage Learning. All Rights Reserved.

Federal Truth in Lending Law full disclosure of the true costs of credit APR Amount of down payment Loan terms Monthly payment Real Estate Loans Covered Rescission Rights 2011©Cengage Learning. All Rights Reserved.

Real Property Loan Law Loan Applications Appraisal Reports Processing Time False Loan Information Sale of Loan Private Mortgage Insurance Impound Accounts 2011©Cengage Learning. All Rights Reserved.

Real Property Securities Dealers Since 1989, most brokers who make or arrange mortgage loans will be required to prepare a disclosure statement called a Lender/Purchaser Disclosure Statement. Made to almost all noninstitutional lenders & note purchasers. 2011©Cengage Learning. All Rights Reserved.

Predatory Lending Law Due to the increasing number of people paying such exorbitant interest rates and finance charges on secured loans that they lose their homes this complex law regulates certain consumer loans under $250,000 that are made after July ©Cengage Learning. All Rights Reserved.

Subprime Loans Loans made to high-risk borrowers that probably would not have qualified under the more traditional requirements. 2011©Cengage Learning. All Rights Reserved.

DEFICIENCY JUDGMENTS Insufficient amount of money due lender under foreclosure process. Restrictions 2011©Cengage Learning. All Rights Reserved.

Purchase Money Instruments Front seller From third person 2011©Cengage Learning. All Rights Reserved.

FORECLOSURE PROCESS & PROCEDURE Trustee’s Foreclosure (1) secured by owner-occupied residences (2) that were made during ©Cengage Learning. All Rights Reserved.

Trustee’s Foreclosure Process Pre-foreclosure Evaluation for Crisis Period Loans Notice of Default Right to Reinstate Notice of Sale Trustee’s Sale 2011©Cengage Learning. All Rights Reserved.

Judicial Foreclosure File Lawsuit Right to Reinstate and Equity of Redemption Trial and Court Judgment Sale of Property Sale of Residential Property in Foreclosure 2011©Cengage Learning. All Rights Reserved.

EFFECTS OF FORECLOSURE ON OTHER DT Foreclosure of a senior lien extinguishes all junior liens Notice of Delinquency Effect of Junior’s Foreclosure Effect of Senior’s Foreclosure Options for Junior Lienor 2011©Cengage Learning. All Rights Reserved.

TRANSFER OF SECURED PROPERTY Right to Transfer Effect of Transfer on Debt Subject To Assumption Liability Requires Deficiency Judgment Novation 2011©Cengage Learning. All Rights Reserved.