MANGMT 3540 1st Edition Lecture 22 Outline of Last Lecture I Process of Sale of Land II Deeds III Types of Ownership Interests Outline of Current Lecture I Assuring Good Title II Real Estate Financing III Mortgage Options IV Default V Priorities of Mortgages Deeds Current Lecture I Assuring Good Title A Abstract of Title and title opinion i Abstract a summary of transactions pertaining to the land since title came from the government ii Title opinion a lawyer s opinion on marketability of the title after examining the abstract B Title insurance i Insurance company guarantees good title ii Check exclusions carefully These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute II Real Estate Financing A Parties i Mortgagor transfer a mortgage borrower ii Mortgagee receives and holds a mortgage lender B History i Title theory title and possession in mortgagee ii Lien theory title and possession in mortgagor III Mortgage Options A Selection of Financing Vehicle 3 options i Cash on closing with mortgage installment land contract or lease with option to buy B Types of Financing instruments i Mortgage a lien on real estate where the holder mortgagee personally exercises foreclosure rights ii Deed of Trust a lien on real estate where a third part the trustee exercises foreclosure rights on behalf of the holder iii Requirements for a valid mortgage signed notarized delivered writing just as with deeds C Open end Mortgage line of credit i Mortgage secures future advances ii Example home equity line of credit D Second Mortgage i Lower in priority and usually later in time than the first ii May also have a 3rd or fourth mortgage etc E Five types of clauses in mortgages i Acceleration clause allows declaration that the entire balance of the loan is due if there is a default on a loan ii Due on sale clause allows acceleration if an interest in land is sold iii Power of sale clause allows a private foreclosure auction nonjudicial foreclosure no court hearing iv Points loan origination fees where one point equals one percent of the loan amount v Prepayment privileges allows early payment without penalty typical unless borrower pays no points or has bad credit IV Default A Creditor s rights i Acceleration ii Private or judicial foreclosure iii Deficiency judgment balance after foreclosure limited in some states B Debtor s rights i Statutory notice of foreclosure sale ii Equity of Redemption right to repurchase the real estate prior to foreclosure by paying the entire balance due to mortgagee iii Statutory Redemption right to repurchase after foreclosure 1 Example some states one year right to redeem after foreclosure sale similar rule for tax lien sales in Missouri 2 Statutory redemption is very limited in Missouri The right applies only if the bank purchases the property as its own foreclosure sale and the mortgagor gives notice and posts a bond V Priorities of Mortgages Deeds A Race Statute i First to record mortgage or deed wins 1 Race to the courthouse 2 Record with the county recorder of deeds where land is located B Notice Statute i One who has notice of another s interest prior to receiving an interest in the land cannot defeat the other s interest ii A good faith purchaser for value who takes title without notice of prior interest in the real estate takes free of prior interests because he is damaged by the prior holder s failure to provide notice iii Recording is the main way to provide notice C Notice Race i First to record after taking her interest without notice of another s interest wins ii This is the Missouri Rule