CHAPTER TWO

1
CHAPTER TWO

• FINANCING NOTES AND MORTGAGES

2
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

3
Chapter Objectives Continued

• Identify and explain alternatives to foreclosure
• Define and explain bankruptcy

4
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

5
Essential Elements of the Mortgage Note Continued

• Acceleration Clause
• Recourse vs. Non- Recourse
• Assumability
• Alienation Clause
• Future Advances
• Release of Lien

6
The Mortgage Instrument

• Mortgagor and Mortgagee
• Promissory Note
• Pledge of property as security
• Obligation to pay

7
Basic Mortgage Requirements

• Borrower and Lender
• Property Description
• Covenants of Warranty
• Provision between spouses
• Covenants and other contractual agreements

8
Mortgage Clauses

• Impound Accounts
• Taxes and Insurance
• Taxes and other assessments
• Hazard Insurance

9
Mortgage Clauses Continued

• Maintenance
• Alienation
• Subordination

10
Mortgages- Other Characteristics

• Subject to a mortgage
• Mortgage Assumption
• Junior Mortgage
• Purchase Money Mortgage
• Trust deeds
• Land contracts

11
Mortgage Default and Foreclosure

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

12
Mortgage Default and Foreclosure Continued

• Voluntary conveyance to the lender
• A Friendly Foreclosure
• Extension Agreement
• Deed in lieu of foreclosure
• Judicial Foreclosure

13
Mortgage Default and Foreclosure Continued

• Non- Judicial Foreclosure
• Equity of Redemption
• Statutory Redemption
• Junior liens are extinguished
• Deficiency judgment

14
Trust Deeds

• A three party instrument
• Trustor- borrower
• Trustee- third party
• Beneficiary- lender

15
Bankruptcy

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