Aceable Agent Level 14

Alternatives to Foreclosure with Borrower Relinquishing Possession:

-Deed in lieu of foreclosure: -Short sale

the promissory note & the security instrument address:

-The borrower's acknowledgment of debt and promise to pay that debt (both the loan amount and earned interest) -The designation of the property as collateral to secure the debt -The terms of repayment and the consequences of failure to meet those terms -The obligations of the borrower to protect the lender's interest in the property during the life of the loan

variable interest clause

...

Deed in Lieu of Foreclosure

1. Borrower Deeds Property to Lender 2. Lender Cancels the Debt 3. Deed and Cancellation Are Recorded 4. Lender Takes Possession

Short Sale

1. Lender Agrees to Sale Price Less Than Debt 2. Lender Negotiates with Other Lienholders 3. Lender Cancels Debt 4. Sale is Completed

Liens that are or can be exempt from debt priority include:

1. property taxes 2. some mechanic liens 3. subordination agreements.

subordination clause

A clause which permits the placing of a mortgage at a later date which takes priority over an existing mortgage -agreed to by a lender if they feel it increases likelihood of repayment of their loan -comes into play after a foreclosure sale -has an affect on debt priority -agreed to by a lender if they feel it increases value of collateralized property

Strict Foreclosure

A legal procedure which enables the lender to take title from a defaulting borrower *without* a foreclosure sale. The court grants the borrower a specified amount of time to pay off the loan. If the debt is not paid, title is awarded to the lender -less commonly used form of judicial foreclosure -some controversy regarding whether this should be categorized as a judicial foreclosure -often used when the debt far exceeds the value of the property -no sale with this form of judicial foreclosure

Georgia's Title Theory

Georgia is a TITLE THEORY STATE; the primary security instrument used is a security deed; with a security deed, the legal title is conveyed to the lender (& is considered a defeasible title ) & the borrower enjoys the typical rights of ownership Every security deed in Georgia will include provisions containing the following declarations: -That this instrument secures the specific loan -That, in the event of default, the lender is authorized to sell the property via a nonjudicial foreclosure process that conforms to state regulations -That the lender will cancel the deed upon satisfaction of the loan

due on sale/alienation clause

Lender can demand payment in full upon sale or transfer of the property to another -if lender approves assumption, they can also raise the interest rate -not allowed in FHA and VA loans -is intended to prohibit assumption of loan without lender approval -is triggered by attempt to sell or convey the property

Similaries and Differences Between Security Instruments

SIMILARITIES: A mortgage, a trust deed, and a security deed all include: -A pledge of the property to secure the promissory note -Provisions or remedies for default of the loan by the borrower (more on this to come!) --The opportunity to record the lender's interest in the property DIFFERENCES: A mortgage, a trust deed, and a security deed differ in regards to: -Who holds title to the property during the loan -Number of parties involved -Ease and expense of foreclosure

Alternatives to Foreclosure with Borrower Retaining Possession of Property:

Special Forbearance: This involves a temporary suspension of scheduled payments with the hopes that the borrower can use the time to make up the delinquency. An assessment of what caused the default in the first place as well as the present and future prospects of loan payment will be considered before a lender would consider this option. Repayment Plan: The lender works with the borrower by spreading out the past due amount over several future payments until the loan is brought current. Loan Modification: The current lender modifies or extends the existing term of the loan in order to offer a more achievable monthly payment. The downside to this for the borrower is that it increases the life of the loan and, consequently, raises the ultimate cost of the loan. Refinance of Loan: In some instances, particularly if equity exists in the property, a refinance of the loan makes sense and is an option for the borrower. When this occurs, the delinquent payments are simply figured into the new loan balance and spread out over the life of the refinance loan. Partial Claim: For borrowers in an FHA loan who meet the eligibility requirements, a one-time, interest-free loan to cover the delinquent amount and reinstate the original mortgage loan is available. This would be a completely separate loan and would need to be paid off once the mortgage loan is satisfied and/or the property is sold. To be eligible for this loan from the FHA Insurance Fund, the borrower would need to able to resume full monthly payments of the mortgage loan once reinstated. Payment Forgiveness: A lender, on rare occasions, might forgive a missed payment if the borrower commits to making full scheduled payments on the existing loan going forward.

acceleration clause

The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant. -is triggered by default of any of the terms of the agreement -lacking this, a lender would have to sue borrower for each missed payment individually makes entire loan due immediately -if borrower cannot make full payment per this clause, the lender may initiate foreclosure

borrower's covenants

The collection of common clauses in a mortgage agreement having to do with the responsibility of a mortgagor to protect the interests of the lender by caring for the collateralized property and addressing the obligations attached to it

Judicial Foreclosure

The process of bringing the property of delinquent borrowers to public sale that involves court action. Proceeds from the foreclosure sale are used to pay off, to the extent possible, the borrower's creditors -the more complex form of foreclosure involving the courts -involves both a lawsuit and a sale -starts with a lis pendens -a surplus money action may be filed by junior lien holders

hypothecation

To pledge an asset as collateral to secure a loan for the purchase of that asset, even while allowing the purchaser of the asset to enjoy all the benefits of ownership as they work to pay for the asset over the timeframe of the loan - When lenders accept a property as collateral, they are usually able to offer the borrower a lower rate on the secured loan than they would for an unsecured note - if the borrower were to fail in their obligations outlined in the loan agreement, the lender would have the right to seize the asset

Deficiency Judgement

When a foreclosure sale takes place, and the funds from that sale do not cover the loan amount, the resulting shortfall is known as a deficiency. A deficiency judgment, then, is the right that a foreclosing party has to pursue a personal judgment against a borrower for the amount of the deficiency. - If a court confirms the sale, Georgia does allow a lender to pursue a deficiency judgment.

constructive notice

a legal term that says that information placed in the public record is assumed to have been accessed by those who have desire, motivation, or need to know it

senior mortgage

a loan with the first lien or priority on a property aka a mortgage that, relative to another mortgage, has a higher lien-priority position

Foreclosure by Entry and Possession

a type of nonjudicial form of foreclosure that depends on the borrower's willingness to grant the lender access and occupancy of the property subject to foreclosure -primary path of foreclosure for just one state -requires complete agreement by the borrow to the process & if not, the lender will need to switch to a judicial process of foreclosure (starts as a nonjudicial) -the lender access and occupancy of the property with permission of the borrower -witness are required

lis pendens

a written notice of a pending legal action & is required as a step in a judicial path to real estate foreclosure, wherein the lender provides notice that a lawsuit has been filed regarding the title and/or ownership interest of the property.

Equitable Redemption

aka equity of redemption refers to a borrower's right to redeem a loan in default by paying the debt in full, including interest, fees, and expenses; happens after acceleration is initiated but before the foreclosure sale

junior mortgages

any mortgage recorded subsequent to an existing mortgage aka later mortgages or 2nd, 3rd, 4th... mortgages

Right to Reinstate

grants the borrow the opportunity to bring current the delinquent loan- including interest, fees, and expenses- in one payment in order to resume paying the loan going forward as would have been the case in the loan's pre-accelerated form

defeasance/satisfaction of mortgage clause

official lender declaration that the terms of the loan agreement have been met -is not triggered until full repayment of loan is made by the borrower -acknowledges full ownership rights of borrower have been achieved -results in the removal of the lender's lien or the conveyance of the title to the borrower

title theory states

states that convey the title to the lender or, more commonly, to a third-party trustee (operating on behalf of the lender) for the life of the loan 3 parties involved: the borrower (trustor), the lender (beneficiary), and the trustee, who holds the title on behalf of the lender nonjudicial foreclosure path is available to the lender because, in signing the note and trust deed, the borrower has waived their right to a court hearing. rely primarily on a trust deed (aka deed of trust) security instrument, which conveys the title to a third-party trustee to hold on behalf of the lender (beneficiary)

lien theory states

states that employ security instruments allowing the borrower to retain title while the lender places a lien on the property to secure the loan the lender doesn't hold title during the loan in a lien theory state & in the event of default, if the lender wants to take possession of the property, it takes a little more effort, and a judicial foreclosure is required. 2 parties involved in the loan agreement (mortgage) of a lien theory state: the borrower (mortgagor) and the lender (mortgagee). security instrument is usually a mortgage that allows the borrower to hold title to the property while the lender places a lien on the property that is either removed once the loan is repaid or is used to foreclose in the event of default.

actual notice

the literal notice that is given directly to an individual; aka express information or fact; that which is known; direct knowledge.

Statutory Redemption

the right that some states give borrowers to redeem a property within a certain timeframe after a foreclosure sale has taken place. Again, this redemption is accomplished by paying off the loan in full, including interest, fees, and expenses. Georgia does NOT recognize statutory redemption.

Power of Sale (Nonjudicial Foreclosure)

this popular form of nonjudicial foreclosure requires the presence of a power of sale clause in the security agreement at the time of signing. The clause pre-authorizes the lender to foreclose and sell the property without court oversight or having to file a lawsuit. the predominant path of foreclosure for over half of the states in the nation, including Georgia -junior lien holders sometimes miss the notice of sale and lose their rights -also known as "sale by advertisement" -the clause pre-authorizing the sale without court oversight must be in the security agreement from the beginning -nonjudicial form of foreclosure predominantly used in more than half of the states in the nation