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Mortgages and Deeds of Trust

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SECURITY AND OBLIGATION Arises out of a loan of money. Security Separate from Obligation. A security cannot exist without a debt.

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Nature of Obligation

anything capable of being reduced to monetary value may be secured by a lien.

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Promissory Note

An unconditional written promise to pay someone a sum of money at a specified future date.

Most notes are negotiable instruments.

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Classification of Notes

Level Payment Notes Unequal Payment—Constant Reduction Unequal Payment—Adjustable Rate Loans Unequal Payment—Balloon Unequal Payment—Negative Amortization

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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).

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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.

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COMMON CLAUSES

Acceleration Clauses Default of Payment Clause Due-on-Sale Clause Due-on-Encumbrance Clause Assignment of Rents Clause Late Charges Clause

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COMMON CLAUSES

Prepayment Clause Or-More Clause Prepayment Fees

Residential Loans Governmental Loans

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Deed of Trust Types

Wraparound Deeds of Trust Blanket Deed of Trust

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More Clauses

Future Advances Clause Subordination Agreements

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Usury Consumer loans

Commercial loans Unregulated loans.

Institutional lenders Real estate brokers Purchase money loans.

Legislative regulation

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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.

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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

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Real Property Loan Law Loan Applications Appraisal Reports Processing Time False Loan Information Sale of Loan Private Mortgage Insurance Impound Accounts

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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.

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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 2002.

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Subprime Loans

Loans made to high-risk borrowers that probably would not have qualified under the more traditional requirements.

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DEFICIENCY JUDGMENTS

Insufficient amount of money due lender under foreclosure process.

Restrictions

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Purchase Money Instruments

Front seller From third person

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FORECLOSURE PROCESS & PROCEDURE Trustee’s Foreclosure

(1) secured by owner-occupied residences

(2) that were made during 2003 - 2007.

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Trustee’s Foreclosure Process

Pre-foreclosure Evaluation for Crisis Period Loans

Notice of Default Right to Reinstate Notice of Sale Trustee’s Sale

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Judicial Foreclosure

File Lawsuit Right to Reinstate and Equity of Redemption Trial and Court Judgment Sale of Property Sale of Residential Property in Foreclosure

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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

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TRANSFER OF SECURED PROPERTY

Right to Transfer Effect of Transfer on Debt Subject To Assumption Liability Requires Deficiency Judgment Novation

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