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Mortgage Notes and Clauses: Understanding Financing Essentials

Dive into the world of mortgage notes and clauses, from essential elements to foreclosure alternatives. Explore definitions, clauses, defaults, and bankruptcy in mortgage financing.

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Mortgage Notes and Clauses: Understanding Financing Essentials

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  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

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