Real Estate Finance Instruments

Chapter 5
Real Estate
Finance Instruments
Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 1

Chapter 5: Real Estate Finance Instruments
Overview
• “Instruments" are written documents

– integral part of most real estate financing
transactions
– promissory notes, trust deeds, mortgages, types
and features of mortgages, and land contracts
• Types and features of mortgages
– typical clauses in each

Key Terms
• Acceleration • Equitable Right of

Clause Redemption
• Alienation Clause • Equitable Title
• Hypothecate
• Balloon Payment • Judicial
• Construction Foreclosure
Loan

Key Terms
• Land Contract • Security

• Mortgage Instrument
• Negotiable • Subordination
Instrument Clause
• Trust Deed

Finance Instruments
• Legal documents that establish the rights

and duties of all parties involved in a
transaction
• Two types of real estate finance documents:
1. Financing instrument (promissory note)
2. Security instrument (mortgage)

Promissory Notes
• Instruments that evidence a promise to pay a

specific person within a specific time frame
− A written promise to pay money
• One promising to pay is the “maker,” usually
buyer
• One to whom payment is promised is the
“payee,” usually lender, which can also be the
seller

Promissory Notes
• Basic evidence of debt, showing who owes

how much to whom
• Typical promissory note includes:
– Date
– Names of parties
– Amount of debt (and the interest rate/note rate)
– How and when money is to be paid
– What happens in event of default
– Signature of maker
Negotiable Instruments
• Promissory notes or other finance instruments

that are freely transferable from one party to
another
– Most notes used in real estate are negotiable
instruments
– When a note is freely transferable, the lender
or other creditor can obtain immediate cash by
selling the note

Four Notes Used in

Real Estate Transactions
1. Straight note:
− Payments of interest-only during the note
term
− Balloon payment at end of loan term
1. Installment note:
− Periodic payments of principal and/or
interest
− In reality, a balloon payment may be
required
Continued on next slide 

Four Notes Used in

Real Estate Transactions
3. Partially amortized installment note or

installment note with balloon:
− Periodic payments of principal and interest
during loan term
− Balloon payment at end of term to pay
balance
3. Fully amortized installment note:
− Regular payment of principal and interest,
− Calculated to pay entire balance by end of
loan term

Security Instrument
• Allows creditor to take ownership of

collateral through foreclosure to satisfy
debt if borrower fails to pay according to
terms of agreement
• Creditor can possess or sell the property
• Even without a security instrument, the
debtor is still obligated to pay the note

Security Instruments
• Usually accompany promissory notes

– Security instruments allow debtor to hypothecate
property
• Hypothecate—Debtor can pledge property as
security for debt without giving up possession
– Serves as security for creditor and motivation for
debtor to fulfill terms of note
– Failure to do so could result in loss of possession

Security Instruments
The two main types of security instruments

used in real estate transactions are:
1. Trust deeds
2. Mortgages

Lien Theory
and Title Theory
Regarding mortgages and mortgage laws,

some states follow:
• Lien theory
• Title theory
• Combination of the two

Lien Theory States
• The mortgage creates a lien against the

property which must be repaid by debtor
• Property serves as collateral hypothecated to
lender as security for debt
• Lender must go through foreclosure
proceedings to obtain title in the event of
default

Title Theory States
• The mortgage instrument gives title to property to

lender while debt is outstanding; owner gets only
possession and use of land
• Once mortgage has been repaid, title reverts to owner
• Lender has restricted rights in the property, but does
not have to go through foreclosure proceedings in the
event of default
• Title theory is the oldest method, and not used in
many states

Lien Theory
and Title Theory
• Most state laws are now a hybrid of lien theory and

title theory
• Most states recognize mortgage as security, and real
estate as collateral
• With a mortgage, procedure in event of default is
judicial foreclosure
– Judicial foreclosure under a mortgage requires
court-ordered sheriff’s sale of property to repay
debt

Trust Deeds
• Instruments held by third party as security for

payment of a note. Also called deeds of trust
– Three-party device
– Borrower is trustor
– Lender is beneficiary
– Independent third party is trustee

Trust Deeds
• Lien theory states: Trust deeds create a lien

against property in favor of the beneficiary.
– Creditor has right to force the sale of
property if debtor defaults on payments

Trust Deeds
Distinguishing characteristic of trust deeds:
• Creditor may begin non-judicial foreclosure
action when debtor defaults on loan payments
− Authorized by power of sale clause
• Process of foreclosing and selling property
through power of sale clause may be concluded
more quickly
− Without the expense involved for court proceedings
− Debtor can often stop the sale by making up back
payments (plus interest and fees) until a few days
before the sale
− Can create issues of validity of sale in some states
Mortgages
• Instruments that conveys in interest in real property to
a lender as security for payment of a note
• Borrower (mortgagor) pledges property to lender
(mortgagee) as collateral for debt, creating a
voluntary lien
• Promissory notes usually accompany security
instruments
– Gives creditor leverage against debtor
– Gives debtor extra incentive to pay.

Mortgages:
Advantages and Disadvantages
For Lender
• Main advantage: Right to accelerate entire debt
in event of default and authority of the court for
judicial foreclosure
• Main disadvantage: Time and expense involved
with judicial foreclosure

Mortgages:
For Debtor
• Main advantage: Lengthy court
proceedings give debtor time to get the
money together
• Main disadvantage: Lender’s right of
acceleration can mean a buyer who misses
one or two payments may have to pay off
the entire debt to save the home

Typical Judicial
Foreclosure Scenario
1. Borrower defaults
2. Lender accelerates debt and files foreclosure action
3. Court finds in favor of creditor, who takes ownership; sheriff
seizes property
4. If lender decides to sell, public is notified for specified
timeframe
5. Public auction is held with minimum bid set
6. Proceeds from highest bidder settle costs of the sale,
property taxes, mortgages and other liens
7. Any surplus goes to borrower; deficits could result in a
deficiency judgment
Know the law in the jurisdictions where you practice!

Redemption
• Some states use the equitable right of redemption

– Allows debtors to redeem (save) property from the time
a notice of a pending foreclosure (lis pendens) is filed
until the confirmation of the foreclosure sale
• Other states use the statutory right of redemption
– Allows debtors to redeem themselves after the final sale
• After redemption, court will set aside sale, pay parties, and
debtor gets title again.

Redemption
• Debtors may avoid foreclosure by making a

a voluntary conveyance of property (also
called deed in lieu of foreclosure)
– Debtors still lose property, but by conveying it
voluntarily before final court action, can avoid a
foreclosure on their credit report
– After confirmation of sale, it is too late
• Lender not obligated to accept deed in lieu
of foreclosure as full satisfaction of debt and
could pursue deficiency judgment

Typical Clauses in
Finance Instruments
• Various clauses are used in mortgages to give

certain rights to the lender or borrower
• Many can be found in the promissory note or
security instrument
– Often appear in both

Acceleration Clause
• Gives lender right to declare entire loan balance

due immediately because of borrower default
– Or violation of other contract provisions
• Most notes, mortgages, trust deeds, and land
contracts contain this clause
• Important to lenders upon default:
– Allows them to make all payments due—without
filing a separate action for each missed payment

Alienation Clause
• Gives lender certain stated rights when there’s a

transfer of property ownership
– Also referred to as a due on sale clause
• Designed to limit debtor's right to transfer property
without creditor's permission.
• Depending on wording, alienation may be triggered
by:
– Title transfer
– Transfer of significant interest in the property
– Abandonment of the property

Alienation Clause
• Upon sale or transfer of interest, lender

will often have right to accelerate debt,
change interest rate, or charge an
assumption fee
• Lender may choose which, if any,
options stated in the contract it will
enforce

Defeasance Clause
• Defeats or cancels certain rights on the occurrence

of a specific event
• Can appear in contracts or mortgages
• Gives borrower right to redeem real estate after
default on a note by paying full amount owed plus
fees and court costs
• Outlines circumstances, procedures, and rules for
redemption to be successful.

Partial Release, Satisfaction,

or Conveyance Clause
• Obligates creditor to release part of the

property from lien and convey title to that part
back to debtor once certain provisions of the
note or mortgage have been satisfied.
• Usually after a certain percentage of the
mortgage balance has been paid.

Partial Release, Satisfaction,

or Conveyance Clause
• Important clause found in many blanket

mortgages and some construction mortgages
– Developer/builder can sell completed homes
with clear title before paying back entire amount
borrowed
– If land is bought with a mortgage, construction
financing is easier to obtain later when the
builder owns part of land free of liens

Prepayment Clause
• Gives lender right to charge borrower a

penalty for paying off the loan early
• Time periods and amount of the penalty may
vary
• Basic effect is to make up interest income the
lender losses when debtor pays loan early

Subordination Clause
• Gives a mortgage recorded at a later date the right

to take priority over an earlier recorded mortgage
• Normally the first instrument or document to get
recorded gets lien priority
– Lien priority determines who gets paid first out of
the proceeds of foreclosure sale
– Property tax liens almost always first priority
– Federal tax liens or other liens could take first
priority, depending on jurisdiction

Subordination Clause
• Usually states instrument that contains clause will be

subordinate (junior) to another lien (mortgage, trust
deed, etc.,) to be recorded later
• Its inclusion must be negotiated at time of entering
into the earlier transaction
• Once first instrument is recorded, usually too late to
arrange with lender
• Also common in home equity loans or lines of credit,
where holder of junior "second mortgage" agrees to
subordinate position even if homeowner later
refinances first mortgage

Other Mortgage
Clauses and Covenants
• In addition to the typical clauses that appear
frequently in real estate mortgages, there are
also a number of covenants
• Covenants are promises
– Can appear in deeds, mortgages, or other
document
– Can compel or prevent certain actions by the
property owner or uses for the property

Other Mortgage
Typical covenants include provisions protecting
lender's security interests in property:
• Promising to keep property in good condition and
repair
• Not damaging or diminishing the property value
• Promising to keep fire, hazard, and flood
insurance
• Agreeing to pay taxes and other assessments on
time

Other Mortgage
• Failure to keep these promises or covenants can
be cited in the mortgage or note as causing the
borrower to be in default
• Buyers should be aware of the clauses and
covenants and understand them
– They should be encouraged to consult legal
counsel before entering into a mortgage

Mortgage Lien Terminology

• First Mortgage: A security instrument with a first lien position
• Second Mortgage: A security instrument in a second lien position
• Senior Mortgage: Any mortgage in a higher position
– A first mortgage is always a senior mortgage
• Junior Mortgage: Any mortgage with a lower lien position than another
– A second mortgage is a junior mortgage to a first mortgage
– A second mortgage is a senior to a third mortgage

Types and Features

of Mortgages
“Mortgage” is often prefaced with
adjectives that describe the particular
function it is serving, e.g.:
• A construction ARM mortgage is an adjustable
rate mortgage used to secure a construction
loan
• An interest-only blanket mortgage secures a
loan with two or more parcels of land as
collateral and the borrower pays only interest

Purchase
Money Mortgage
• Given by a buyer to a lender or seller to secure
part or all the money borrowed to purchase
property
• When given to a seller, can be called a seller-
held mortgage or soft money mortgage
– Borrower receives credit instead of cash
• Can be a first mortgage or a junior mortgage
– Depends on its lien priority

Refinance Mortgage
• Allows borrower to redo or expand loan
• To get better interest rate or terms on new loan
compared to original mortgage
– May be called no cash-out or rate/term
refinance
– Usually a first mortgage
• To receive cash from equity in the home
– May be called hard money mortgage or cash-
out refinance
– Almost always a junior mortgage

Home Equity Loan,

Home Equity Line of Credit
• Secured by a mortgage on one's principal
residence
• Home equity loan:
– Typically closed-end, fixed amount amortized over
fixed period with regular payments
• Home equity line of credit (HELOC):
– Open-end, borrower draws as needed
– Typically has two stages-draw and repayment
• Usually attaches a junior lien to the property

Blanket Mortgage
• Covers more than one parcel of land or lot

– Usually used to finance subdivision
developments
• Usually has a partial release clause
– Allows borrower to pay a certain amount to
release some lots, with mortgage
continuing to cover remaining lots

Bridge Mortgage
• Occurs between termination of one
mortgage and beginning of the next
• When next mortgage is taken out, bridge
mortgage is repaid
• Designed to be temporary and used
most commonly for construction
financing.
• A less common use is to buy a new
home before selling the old one
Open-End Mortgage
• Allows borrower to request additional funds

from lender, up to certain pre-defined limit
• Lenders typically will not advance funds in
excess of original principal balance
• May limit loan amount based on LTV
• Could be used as a home equity line of credit

Package Mortgage
• Includes personal property, like appliances, in

the property sale and all are financed in one
contract
– Personal property also serves as collateral for
loan
• Common use is to buy a furnished
condominium
– Loan and mortgage documents may also recite
appliances and/or furniture as part of
transaction.

Reverse Mortgage
• Allows qualified senior homeowners over the age of
62 to convert equity into monthly income stream or
line of credit
– Borrower must have substantial equity in home
• Mortgage is repaid when:
– Home is sold
– Borrower does not occupy the home for 12 consecutive
months
– Borrower dies
• Also called:
– Reverse annuity mortgage
– Reverse equity mortgage
– Home equity conversion mortgage
Equity
Participation Mortgage
• Permits lender to share part of the earnings,
income, or profits from a real estate project
• Usually in addition to collecting principal and
interest payments on the loan
– For example, lender may receive 5% of gross
rents
• Done mostly for commercial real estate
projects

Wraparound Mortgage
• Describes financing arrangement in which
existing loan is combined with a new loan
• Total debt (new + existing loan) treated as
single obligation by buyer, with one payment
made on entire debt
• May be used in lieu of traditional refinancing
• Less often offered by seller with existing lower-
rate loan to make property more attractive to
buyer

Construction Mortgage
• A temporary loan to finance construction of

improvements and buildings on land
• Also called an interim loan
• When construction is complete, the loan is
replaced by permanent financing, called a take
out loan
• New construction can take as long as a year to
complete
– Requires extended rate locks in most cases

• Can be profitable, but regarded as risky

• High interest rates and loan fees
• Closely supervise funds disbursement to ensure
projects are completed
• Danger borrower will overspend and exhaust loan
funds before construction is complete
– In this case, lender will be left with partially
completed project that can't be sold easily in
existing state, with very real possibility of
foreclosure

• To protect against this, lenders use plans for

disbursing construction loan proceeds to
guard against overspending by the borrower
• Three common disbursement plans are:
1. Fixed disbursement plan
2. Voucher system
3. Warrant system

Disbursement
Fixed Disbursement Plan

• Pays a percentage of funds at a set time
• Series of predetermined disbursements,
called obligatory advances, paid at various
stages of construction
– Example: Lender will release only 10% of the
funds when a project is 20% complete, with
future draws of 20% each time construction
progresses 20% more toward completion

Disbursement
Voucher System
• Requires contractor or borrower to pay
own bills and submit receipts to lender for
reimbursement
Warrant System
• Lender directly pays bills presented by
various suppliers and laborers on project

Permanent
Construction Loan
• A special type loan where there is only one

loan and one closing, with no take out loan
• Fixed disbursement schedule for loan funds
• Loan automatically converts to a permanent

first mortgage when construction is finished

Graduated Payment
Mortgage (GPM)
• A specialized payment structure, not a
specific type of mortgage
• Allows borrowers to make smaller payments
in early years
• Unpaid interest results in scheduled
negative amortization
• At predetermined point, payments
escalate until reaching a point they fully
amortize
Land Contracts
• Real estate installment agreements where buyer
makes payments to seller for right to occupy and
use property
– No deed or title is transferred until all, or specified
portion of, payments are made
• Another instrument to finance purchase of real
estate
• Also called land installment contracts, installment
sales contracts, land sales contracts, real estate
contract, and other names

Land Contracts
• Different than mortgage or trust deed

– Where debtor takes title to property, with
creditor holding mortgage or trust deed as
security lien against it

Land Contracts
• Under land contract:

– seller (vendor) holds title to property as
security, not just a mortgage lien
– Debtor (vendee) has right to possess and
enjoy land, but is not legal owner
– Seller retains legal title to property
– Buyer becomes owner in fact, having
possession and equitable title, but no title and
no deed

Land Contracts
• Equitable title: Interest in real property

created on execution of valid sales contract
whereby actual title will be transferred by
deed at a future date
• Though actual title won't be transferred until
future date, person who holds equitable title
still enjoys certain rights and privileges

Land Contracts
• Some risk that seller could mortgage property for

an amount greater than his interest in it
– Because the seller retains title to the property
• Under most state laws, seller can’t mortgage
property for more than balance due without
buyer’s consent
• Seller must give buyer a statement (at least once
a year or as requested) showing the amount of
payment that have been credited to principal and
interest, and balance due
Buyer Default
In many states, if contract is in effect for less than

a certain number of years and buyer has paid
less than a certain percentage of purchase price
before default:
• Seller may initiate forfeiture proceedings 30 days
after buyer’s default
• Give buyer written notice of default and of seller’s
intent to declare the contract forfeited unless
buyer corrects the default
continued on next slide 
Buyer Default
• Buyer has 10 days to correct default,

reinstate contract terms, and retain rights
• If buyer fails to remedy default within 10-
day notice period, buyer loses all rights to
property, as well as all payments made to
that point

Buyer Default
• If contract has been in effect for more than the
minimum number of years required under state
law, or
• Buyer has paid at least the percentage of
purchase price as required under state law,
then:
– On default, seller must use foreclosure
proceedings, same as under a mortgage, to
protect buyer's substantial investment

Land Contracts:
For Seller
• Main advantage: The right to hold title as security,
since buyer does not receive deed to property until
all, or a specified portion of, contract purchase
price is paid
• Main disadvantage: Expense and time required
for foreclosure after under state law

Land Contracts:
For Buyer
• Main advantage: Easier to qualify for than a
conventional loan
• Main disadvantage: Lack of ownership,
making it difficult for borrower to obtain
financing for the equity or improvements as
banks are reluctant to lend to someone
without legal title to property; also, offers little
or no protection if not recorded

Summary
1. Finance instruments are written documents

establishing rights and duties of the parties.
Promissory notes are written promises to pay
money. They’re negotiable instruments and
freely transferable so creditors can sell them for
cash. The one promising to pay the money is
called the maker of the note, usually the
homebuyer. The one to whom payment is
promised is called the payee, usually the lender.
There are four common note types including
straight note, installment note, installment note
with balloon, and fully amortized note.

Summary
2. Security instruments give a creditor the right to

sell collateral to satisfy the debt if the debtor
doesn’t pay as agreed. A security instrument gives
a debtor the right to hypothecate (pledge) property
as collateral without giving up possession. Two
types are trust deeds and mortgages. Trust deeds
are three-party instruments, with non-judicial
foreclosure via power of sale clause in the event of
default. Trust deeds are rarely used in some states
because they only use non-judicial foreclosure.

Summary
3. Mortgages create liens against property as security
for debt. If in default, judicial foreclosure ensues:
Notice of default, foreclosure action filed, order of
execution has sheriff sell property, advertising, and
public auction (minimum bid based on percentage
of appraised value, confirmation of sale to highest
bidder, sheriff’s deed issued.) Debtor has equitable
right of redemption to regain property until
confirmation of sale. Process is slow and
expensive, but has court authority. The order of
mortgage is important: A senior mortgage is any
mortgage in a higher lien position; a junior
mortgage is in a lower lien position.

Summary
4. Many clauses are common in real estate
contracts. An acceleration clause lets the lender
call the loan balance due if in default. A
prepayment clause lets lenders charge a penalty
for paying off a loan early. An alienation clause
gives lenders some stated rights if the property is
transferred (also called due on sale clause). A
defeasance clause is used to defeat or cancel a
certain right on the occurrence of a specific event.
Subordination lets a later-recorded mortgage
take priority over an earlier one. A partial release
is when a lien is released from part of land if some
part of balance is paid.

Summary
5. Mortgage can be prefaced by different words describing
its type or function. Purchase money mortgage, seller
takes mortgage for part of purchase price. Soft money
mortgage, borrower gets credit instead of cash. Hard
money mortgage, borrower gets actual cash (e.g.,
cash-out mortgage). Bridge mortgage, temporary
mortgage between two others and repaid with a later
mortgage. Package mortgage, includes personal
property. Blanket mortgage, for more than one land
parcel. Construction mortgage, temporary loan to
finance buildings.

Summary
6. Land contract is a real estate installment

agreement. Buyer makes payments to seller
for right to occupy land, but no title is
transferred until all, or part of, payments are
made. Buyer has equitable title under a land
contract. States differ in how they treat land
contracts. The main problem for the buyer is
that he or she can’t borrow against equity with
a land contract.

Quiz
1. A promissory note calling only for

payment of interest during its term is
a(n)
a. amortized note.
b. installment note.
c. negotiated note.
d. straight note.

Quiz
2. The mortgage clause that permits a

lender to declare the entire unpaid
balance on a loan due and payable at
once on default of the borrower is a(n)
a. acceleration clause.
b. escalation clause.
c. defeasance clause.
d. forfeiture clause.

Quiz
3. A mortgage clause that permits the

lender to call the outstanding balance
due and payable should the property
be sold by the borrower is a(n)
a. acceleration clause.
b. alienation clause.
c. balloon payment clause.
d. exculpatory clause.

Quiz
4. Which document accompanies the

mortgage?
a. abstract of title
b. contract of sale
c. deed
d. promissory note

Quiz
5. To foreclose a mortgage, the creditor

a. files an attachment in the amount of the
debt.
b. files a court action.
c. notifies the debtor of the default, waits ten
days, publishes a notice of default in the
paper, then claims a forfeiture.
d. notifies the trustee of default.

Quiz
6. A mortgage under which the debtor

may re-borrow up to the original note
amount under the same document is
a(n)
a. amortized mortgage.
b. hypothecated mortgage.
c. open-ended mortgage.
d. package mortgage.

Quiz
7. A budget mortgage is best defined as

one that
a. includes payments for principal, interest,
taxes, and insurance.
b. includes personal as well as real property.
c. includes principal and interest payments.
d. is made to people with lower incomes.

Quiz
8. A builder finances the construction of an

apartment building through a local bank. If
money is released to the builder at various
stages of construction, these payments are
called
a. acceleration advances.
b. obligatory advances.
c. release payments.
d. sight drafts.

Quiz
9. The term take out loan is most closely

associated with
a. construction loans.
b. junior loans.
c. loans against the land.
d. Truth in Lending requirements.

Quiz
10. Money obtained from a foreclosure

sale in excess of the debt and court
costs belongs to the
a. court.
b. debtor.
c. lender.
d. sheriff.

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Chapter 5

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 1

• “Instruments" are written documents

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 2

• Acceleration • Equitable Right of

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 3

• Land Contract • Security

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 4

• Legal documents that establish the rights

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 5

• Instruments that evidence a promise to pay a

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 6

• Basic evidence of debt, showing who owes

• Promissory notes or other finance instruments

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 8

Four Notes Used in

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 9

Four Notes Used in

3. Partially amortized installment note or

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 10

• Allows creditor to take ownership of

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 11

• Usually accompany promissory notes

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 12

The two main types of security instruments

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 13

Regarding mortgages and mortgage laws,

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 14

Lien Theory States

• The mortgage creates a lien against the

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 15

Title Theory States

• The mortgage instrument gives title to property to

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 16

• Most state laws are now a hybrid of lien theory and

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 17

• Instruments held by third party as security for

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 18

• Lien theory states: Trust deeds create a lien

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 19

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 21

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 22

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 23

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 24

• Some states use the equitable right of redemption

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 25

• Debtors may avoid foreclosure by making a

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 26

• Various clauses are used in mortgages to give

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 27

• Gives lender right to declare entire loan balance

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 28

• Gives lender certain stated rights when there’s a

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 29

• Upon sale or transfer of interest, lender

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 30

• Defeats or cancels certain rights on the occurrence

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 31

Partial Release, Satisfaction,

• Obligates creditor to release part of the

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 32

Partial Release, Satisfaction,

• Important clause found in many blanket

Mortgage Lending P&P 3rd Edition/Updated Nov. 6, 2009 33