1. a. Sedgewick arranged for an open-end construction loan from the Second National Bank not to exceed $50,000. The loan was closed and Sedgewick drw e$30,000 initially. Three months later he drew the remaining $20,000. What is the bank’s position concerning the possibility of intervening liens?
1.b. Distinguish between a mortgage and a note.
2.a. If, in Problem1, there was no definite agreement for future advances between Sedgewick and the bank at the time the initial $30,000 loan was closed, would your answer be different?
2.b. What does it mean when a lender accelerates? What is meant by forbearance?
3.a. Last year Jones obtained a mortgage loan for $100,000. He just inherited a large sum of money and is contemplating prepaying the entire loan balance to save interest. What are his rights to prepay the loan?
3.b.Can borrowers pay off, part or all, of loans anytime that they desire?
4.a. First Bank Company holds a note from Jason Black and a first mortgage on real estate owned by Jason Black to secure it. Mr. Black sold his property to Robert Frasca, and Robert Frasca assumed the mortgage. The bank did not give Mr. Black a release from his debt. Subsequently Mr. Frasca defaulted in payment on the note. After some negotiating, the bank extended the term of the note and increased the interest rate. What is Mr. Black’s position at this stage of the transaction?
4.b. What does non-recourse financing mean?
5.a. Mort owns a property. Jessica Rosen holds a first mortgage against it, and Alex Nelligan holds a second mortgage. Mort defaults on his mortgage payments. Ms. Rosen forecloses without joining Mr. Nelligan in the foreclosure suit. The property is sold to Shelia McBride at the foreclosure sale. What are Mr. Nelligan’s rights?
5.b. What does assignment mean and why would a lender want to assign a mortgage loan?
6.a.What would your answer be in Problem 5 if Mr. Nelligan’s mortgage was not recorded?
6.b. What is meant by a “purchase money“ mortgage loan? When could a loan not be a purchase money mortgage?
7.a. what if Mr. Nelligan was joined in the foreclosure suit but forgot to attend the sale and bid? Does Mr. Nelligan have any other way of getting Ms. Rosen to pay?
(Reference Problem 5)
Mort owns a property. Jessica Rosen holds a first mortgage against it, and Alex Nelligan holds a second mortgage. Mort defaults on his mortgage payments. Ms. Rosen forecloses without joining Mr. Nelligan in the foreclosure suit. The property is sold to Shelia McBride at the foreclosure sale. What are Mr. Nelligan’s rights?
7.b. What does default mean? Does it occur only when borrowers fail to make scheduled loan payments?
8.a.Bob entered into a land contract to purchase real estate from Sam. The purchase price was to be paid over a 10-year period by monthly amortization. At the end of five years, Bob defaulted, having failed to make his required payments. The contract provided that in event of default, the seller could declare a forfeiture after a period of 30 days and repossess the property. If the court should consider the land contract an equitable mortgage, what might be the rights of Bob and Sam?
8.b. When might a borrower want to have another party assume his liability under mortgage loan?
9.a. A debtor has filed a plan to reorganize his affairs under Chapter 13 of the Bankruptcy Code. The plan calls for payment of 10 cents on the dollar to all unsecured creditors over the next three years. The only secured creditor is Last Bank and Trust, whose lien is secured by the debtor’s personal residence. The plan calls for curing the present payments in arrears over one year and reducing the scheduled payments by 50 percent for three years. Will the court approve the debtor’s plan? Why or why not?
9.b. What does deficiency judgment mean?
10.a. Mr. Smith acquired a property consisting of one acre of land and a two-story building five years ago for $100,000. He also obtained an $80,000 mortgage loan from ACE Bank to provide financing to complete the purchase. This year, Mr. Smith constructed another building on the property with his own funds at a cost of $20,000. Mr. Smith has decided after completing the building to approach Duce Bank to borrow and mortgage the new building with a $16,000 loan. Is Duce Bank likely to provide the $16,000 in financing? What other options may Mr. Smith have to consider?
10.b. What is a land contract?
11.a.Ms. Brown purchased a property consisting of one acre of land and a building for $100,000 five years ago. She obtained an $80,000 mortgage loan from ABC Bank at that time. The building was very old and Ms. Brown has just had it torn down. She now wants to build a new building. Ms. Brown hopes to finance construction with ABC Bank and will call them soon to discuss financing the new project. How will ABC Bank evaluate the possibility of making another loan to Ms. Brown?
11.b.How can mechanics’ liens achieve priority over first mortgages that were recorded prior to the mechanics’ lien?
12.Name possible mortgageable interests in real estate and comment on their risk as collateral to lenders.
13.What is meant by mortgage foreclosure, and what alternatives are there to such action?
14.Explain the difference between a buyer assuming the mortgage and taking title “subject to” the mortgage.
15.What dangers are encountered by mortgagees and unreleased mortgagors when property is sold “subject to” a mortgage?
16.What is the difference between the equity of redemption and statutory redemption?
17.What special advantages does a mortgagee have in bidding at the foreclosure sale where the mortgagee is the foreclosing party? How much will the mortgagee normally bid at the sale?
18.Is a foreclosure sale sometimes desirable or even necessary when the mortgagor is willing to give a voluntary deed?
19.What are the risks to the lender if a borrower declares bankruptcy?
20.What is a deficiency judgment and how is its value to a lender affected by the Bankruptcy Code?