1. © 2008 by South-Western, Cengage Learning Chapter 10 Charles J. Jacobus Thomas E. Gillett

2. © 2008 by South-Western, Cengage Learning Georgia Real Estate An Introduction to the Profession Seventh Edition Chapter 10 Mortgages and Notes

3. © 2008 by South-Western, Cengage Learning Promissory Note Promissory Note Contract between a borrower and lender Creates the obligation Negotiable instrument In writing

4. © 2008 by South-Western, Cengage Learning Promissory Note Promissory Note Obligor, obligee Simple Interest Prepayment privilege or prepayment penalty Default Late payment penalty Security

5. © 2008 by South-Western, Cengage Learning Mortgage Hypothecation Borrower retains possession Pledging Lender has possession Mortgagor vs. Mortgagee

6. © 2008 by South-Western, Cengage Learning Deed of Trust Parties to a Deed of Trust Trustor Beneficiary Trustee Reconveyance Default Trustee

7. © 2008 by South-Western, Cengage Learning Security Deed Conveys legal title to the lender Grantor vs. Grantee Security Deed

8. © 2008 by South-Western, Cengage Learning Provisions and Clauses Section 1 Make payments on time Section 2 Payment 1 st applied to interest Does not have to accept partial payment Section 3 Escrow Account - RESPA

9. © 2008 by South-Western, Cengage Learning Provisions and Clauses Section 4 Covenant to pay taxes Section 5 Covenant to pay insurance Section 6 Occupancy within 60 days

10. © 2008 by South-Western, Cengage Learning Provisions and Clauses Section 7 Covenant of good repair Reasonable entry Section 8 False statements on loan application Section 10 Mortgage Insurance

11. © 2008 by South-Western, Cengage Learning Provisions and Clauses Section 18 Alienation or due on sale Section 19 Equitable vs. statutory redemption Section 22 Acceleration clause Lender as attorney in fact

12. © 2008 by South-Western, Cengage Learning Provisions and Clauses Section 23 Defeasance clause – cancels security instrument Satisfaction of the Security Deed Marked satisfied and re-recorded “Cancellation of Deed to Secure Debt”

13. © 2008 by South-Western, Cengage Learning Foreclosure on a Security Deed Notifies borrower of default Demand Letter Advertised for 4 consecutive weeks Sold at auction 1 st Tuesday of the month on courthouse steps

14. © 2008 by South-Western, Cengage Learning Existing loan does not contain an alienation clause Buyer takes no personal for the loan Purchaser remains liable “Subject to”

15. © 2008 by South-Western, Cengage Learning Buyer promises to pay the loan In a default – Seller has recourse against the buyer Assumption with a Release of Liability Substitutes Buyer’s liability for the Seller’s Novation Assumption

16. © 2008 by South-Western, Cengage Learning Estoppel Certificate of Reduction Estoppel Certificate Barred from taking a contrary position

17. © 2008 by South-Western, Cengage Learning Debt Priorities Debt Priorities First mortgage / Senior mortgage Second mortgage / Junior mortgage Subordination Chattel liens

18. © 2008 by South-Western, Cengage Learning The Foreclosure Process Foreclosure: “cut off” Delinquent Loan Foreclosure Routes Judicial foreclosure Nonjudicial foreclosure

19. © 2008 by South-Western, Cengage Learning Judicial Foreclosure Procedure Title search Lawsuit naming all defendants Judgment Notice of Lis Pendens Public Auction

20. © 2008 by South-Western, Cengage Learning Judicial Foreclosure Equity of Redemption Deficiency Judgment Referee’s Deed / Sheriff’s Deed Statutory Redemption Certificate of Sale

21. © 2008 by South-Western, Cengage Learning Strict Foreclosure Judicial Foreclosure without a sale No statutory right of redemption

22. © 2008 by South-Western, Cengage Learning Non-Judicial Foreclosure Notice of Default Property is advertised Public Auction

23. © 2008 by South-Western, Cengage Learning Entry and Possession Deed in lieu of Foreclosure Voluntary act – friendly foreclosure May not terminate rights of junior lien holders Equitable Mortgage

24. © 2008 by South-Western, Cengage Learning Overview of Mortgage Foreclosure

25. © 2008 by South-Western, Cengage Learning Key Terms Key Terms Acceleration clause Beneficiary Deed of Trust Deficiency judgment First mortgage Foreclosure Junior mortgage Mortgage Mortgagee Mortgagor Naked title Power of sale Promissory note Reconveyance deed Security deed Subordination Trustee Trustor