Real Estate Finance Law
Authors:
Nelson, Grant S. / Whitman, Dale A. / Burkhart, Ann M. / Freyermuth, R. Wilson
Edition:
6th
Copyright Date:
2015
37 chapters
have results for real estate
Chapter 8. Statutory Impacts on Foreclosure Part 3 67 results (showing 5 best matches)
- 11 U.S.C.A. § 101(51B). The term has been interpreted to include raw land even though it generated no income, In re Oceanside Mission Associates, 192 B.R. 232, 28 Bankr. Ct. Dec. (CRR) 703, 35 Collier Bankr. Cas. 2d (MB) 336, Bankr. L. Rep. (CCH) ¶ 76897 (Bankr. S.D. Cal. 1996). Even where the business activities conducted by the debtor are closely related to the debtor’s ownership of the land, courts have sometimes concluded that the debtor’s business activities were sufficiently “substantial” to prevent characterization of the land as single asset real estate. See, e.g., In re Scotia Pacific Co., LLC, 508 F.3d 214, 49 Bankr. Ct. Dec. (CRR) 12, 58 Collier Bankr. Cas. 2d (MB) 1508, Bankr. L. Rep. (CCH) ¶ 81053 (5th Cir. 2007) (debtor engaged in timber harvesting conducted substantial business other than operating real estate and thus was not single asset real estate debtor); In re Kkemko, Inc., 181 B.R. 47, 27 Bankr. Ct. Dec. (CRR) 134, 33 Collier Bankr. Cas. 2d (MB) 757, Bankr. L....
- Recall that the bankruptcy estate includes all interests that the debtor had in any property at the time of the bankruptcy petition, including redemption rights. See § 8.12 supra, note 338. Suppose that Bank had foreclosed on Debtor’s real estate and completed its foreclosure sale prior to the Debtor’s Chapter 7 petition. If the real estate sold for less than its value, it may be advantageous for the trustee to exercise the debtor’s state statutory redemption right (if the state’s law permits statutory redemption), because these statutes typically permit the mortgagor to redeem by paying an amount equal to the foreclosure sale price plus certain statutory amounts. See § 8.4 supra. If the trustee can redeem the real estate for a price less than its value, the trustee can then liquidate the real estate and hopefully produce additional proceeds for distribution to creditors.
- Single asset real estate debtors will have a few other creditors, typically trade creditors (such as providers of repair or janitorial services); however, the unsecured claim of an undersecured mortgagee on single asset real estate inevitably dwarfs the claims of all other unsecured creditors combined.
- A classification question may arise when a parent company and numerous single-asset subsidiary entities seek bankruptcy simultaneously. For example, in In re Meruelo Maddux Properties, Inc., 667 F.3d 1072, 55 Bankr. Ct. Dec. (CRR) 279, 67 Collier Bankr. Cas. 2d (MB) 202, Bankr. L. Rep. (CCH) ¶ 82159 (9th Cir. 2012), a parent company (Meruelo Maddux Properties, Inc.) and 53 subsidiaries, including Meruelo Maddux Properties—760 S. Hill Street, LLC (“Hill Street”) filed simultaneous Chapter 11 petitions. The cases were jointly administered but not substantively consolidated. Bank of America moved to have Hill Street classified as a single asset real estate debtor under section 101(51B). The parent company objected, arguing that the parent and subsidiaries were operated on a consolidated basis and that revenues from operations at each subsidiary were swept into a single operating account. The district court held that Hill Street was a single asset real estate debtor because it met the...
- Note that section 362(a) not only stays actions to foreclose property of the estate, but also “property of the debtor.” 11 U.S.C.A. § 362(a)(5). The trustee’s abandonment of mortgaged real estate does not inherently constitute relief from the stay; thus, despite the abandonment, the mortgagee cannot commence or proceed with foreclosure without first obtaining relief from the stay. See § 8.12 supra. Often, the mortgagee will already have filed a motion for relief from stay at the time the trustee proposes to abandon the real estate, in which case the court can simultaneously confirm the abandonment and lift the stay to permit the mortgagee to proceed with foreclosure. As explained in § 8.12 supra, notes 389–390, if a Chapter 7 debtor lacks equity in the mortgaged real estate, the mortgagee is entitled to relief from stay upon motion under section 362(d)(2). See, e.g., In re J & M Salupo Development Co., Inc., 388 B.R. 809 (Bankr. N.D. Ohio 2008).
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Chapter 8. Statutory Impacts on Foreclosure Part 2 79 results (showing 5 best matches)
- [M]ost single asset real estate bankruptcies, by their very nature, fit the bad faith standard…. [I]f debtors in single asset real estate cases were deemed to have filed in bad faith due to the very nature of their business, § 362(d)(3) would never have the opportunity to provide relief from the automatic stay to creditors with an interest in single asset real estate cases.
- Nevertheless, a valid mortgage lien generally survives the bankruptcy filing, i.e., the bankruptcy estate takes the mortgaged real estate subject to the continued mortgage lien. the trustee has a practical interest in mortgaged real estate only if the debtor has “equity” in it—i.e., only if the value of the real estate exceeds the total amount of mortgage indebtedness against it. If the debtor has no equity in the real estate, the trustee should (and typically will) abandon it; it makes no sense for the trustee to incur the costs of insuring, preserving, and selling the real estate if those activities will produce no value for unsecured creditors. If the trustee abandons the real estate, title is vested back into the debtor, If instead the trustee concludes that there is equity in the real estate, the trustee can sell the real estate with the approval of the bankruptcy court, either subject to the existing mortgages or (more commonly) free and clear of them.
- In the late 1980s and early 1990s, as the commercial real estate market experienced substantial default rates and declines in real estate values, the number of real estate bankruptcy cases (particularly those involving single asset borrowers) increased dramatically. Borrowers facing state law foreclosure sought Chapter 11 relief in large numbers, hoping to use post-bankruptcy net rents to fund the cost of preparing and confirming their Chapter 11 plans. Mortgagees objected, claiming that post-bankruptcy net rents constituted cash collateral and could not be used without providing the mortgagees with “adequate protection” of their liens on those rents.
- Suppose that a Chapter 7 trustee abandons mortgaged real estate because Debtor owes Mortgagee $150,000 but the real estate is worth only $100,000. A further question then arises: how much is the debt for foreclosure purposes? Is it $150,000 (i.e., the outstanding “debt” under state law)? Or is it only $100,000 (i.e., the amount of the mortgagee’s “secured claim” under Bankruptcy Code section 506(a))? If Debtor is an individual, Debtor’s personal liability on the mortgage debt will likely be discharged at the conclusion of the bankruptcy. As a result, if Debtor wants to retain the mortgaged real estate, Debtor might attempt to tender $100,000 cash to Mortgagee and argue that this tender satisfied the mortgage and thus extinguished the mortgage lien. In support of this argument, Debtor might point to the language of Bankruptcy Code section 506(d), which provides that a lien is void “[t]o the extent that [it] secures a claim against the debtor that is not an allowed secured claim.”
- Frequently, commercial real estate projects are “single asset” projects ( , the entity created to hold title to the project owns no other real estate and engages in no other business). When a single asset entity files a Chapter 11 petition, “reorganization” in essence amounts to a two-party contest between the mortgagor and the mortgagee over ownership of the project. The debtor usually has no operating business (other than passive collection of rent), no other creditors (other than a few trade creditors with relatively small claims), and no employees whose interests are implicated. The project will continue to operate, foreclosure or no foreclosure. Indeed, many have questioned whether it is appropriate to use Chapter 11 in these situations. Nevertheless, the Bankruptcy Code did not exclude owners of single asset real estate from seeking bankruptcy protection, and such owners commonly sought bankruptcy protection as a means to delay foreclosure. This delay is particularly galling to...
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Chapter 1. An Introduction to the Law of Mortgages 17 results (showing 5 best matches)
- The material in this treatise focuses upon, in a variety of simple and sophisticated factual settings, the use of real estate as security for obligations. In this connection, there is a substantial emphasis on the real estate mortgage and its functional equivalents. As the term is used in its modern context, a real estate mortgage involves a transfer by a debtor-mortgagor to a creditor-mortgagee of a real estate interest, to be held as security for the performance of an obligation, normally the payment of a debt evidenced by the mortgagor’s promissory note.
- A purchase money mortgage arises where the mortgagor’s acquisition of the mortgaged real estate is financed by the mortgagee-lender. Often a seller of real estate will take back a purchase money mortgage for part of the purchase price. More commonly, however, a third party lending institution will take a mortgage covering real estate acquired by the mortgagor with funds provided by the lending institution. In many states this is also treated as a purchase-money mortgage. Such transactions may be as simple as the purchase of a single family residence by a borrower-mortgagor or as complex and sophisticated as the construction and long term financing obtained by a developer to build a shopping center or an apartment building. In the non-purchase money situation the mortgagee-lender does not provide an acquisition loan but rather lends money on real estate already owned by the borrower-mortgagor. A corporation, for example, may often mortgage previously owned real estate to obtain...
- Today most mortgages are amortized or repaid over a substantial number of years. Until the 1930’s most mortgages, however, were of the “balloon-note” type. Typically these were short-term mortgages for three or five years, and borrowers made only interest payments until the loan came due. Then if the borrower had not saved enough to pay the entire principal, he would expect the note to be renewed or would attempt to refinance it with another lender. However, during the depression period of the 1930’s, many of these lenders were forced to demand full payment and to foreclose on properties when mortgagors could not pay. With the encouragement of the Federal Housing Administration and federal housing legislation, lenders during this period developed the amortized mortgage loan system under which mortgagors were permitted to repay loans over many years by making monthly principal and interest payments. Such loans are common today in both the housing and commercial real estate markets....
- For a more complete analysis of the historical development of the modern real estate mortgage, see Osborne, Mortgages §§ 1–7 (2d ed. 1970).
- Cunningham and Tischler, Disguised Real Estate Security Transactions as Mortgages in Substance, 26 Rutgers L.Rev. 1 (1973).
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Chapter 5. Transfer by the Mortgagor and the Mortgagee Part 2 45 results (showing 5 best matches)
- Article 9 does not usually affect real estate mortgages as such; it expressly provides that it does not apply “to the creation or transfer of an interest in or lien on real estate * * *.” However, when the real estate lien and its associated obligation are themselves being employed as security for a separate debt, the documents (the note and mortgage) are personal property rather than real estate, and their pledge is covered by Article 9. The language quoted above might be read to negate this argument, since a pledge of a note and mortgage obviously involves, in part, a “transfer of a … lien on real estate.” However, this reading is contradicted by the Code’s statement that application of Article 9 is “not affected by the fact that the obligation [being pledged] is itself secured by a transaction or interest to which this Article does not apply.”
- of a security interest to an obligation secured by real estate operates to attach the security interest to the underlying interest in real estate, of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage, or other lien on personal or real property securing the right.” This language confirms that the mortgage “follows the note,” and that no separate act (such as recording a mortgage assignment in the real estate records) is necessary to ensure perfection with respect to the mortgage.
- Incidentally, while the foregoing discussion is couched in terms of a mortgage loan as the underlying collateral, the same principles apply if the collateral is a vendor’s interest in a real estate installment contract instead. In the minds of many real estate lawyers, the third reason to use a transfer statement discussed in the preceding paragraph takes on even greater significance when an installment contract rather than a mortgage is the underlying real estate security document, simply because of the instinctive (although largely misplaced) view that the vendor under an installment contract still has the ...and delivered by someone who has a record chain of title to the land (analogous to a chain of assignments in mortgage law). Again, it is the recording of the combination of the security agreement and affidavit between the pledgor and pledgee, and the transfer statement between the pledgee and the party who buys the underlying loan and its associated real state security, that...
- When a mortgage loan is used to collateralize some other indebtedness, two questions of enforcement arise. One question is what actions the pledgee who has taken the mortgage and note as collateral must take to realize on that collateral when the debt that the pledge secures is in default. The other question is which of the parties—the pledgor or the pledgee of the note and mortgage—can assert the usual rights embodied in the note and mortgage against the mortgagor and the real estate when the real estate loan is in default but the indebtedness that it is pledged to secure is not.
- Commentators sometimes complain that the real estate recording system should be made into a functional and transparent means of keeping track of the right to enforce mortgage loans. But this is a hopelessly poor idea. Notes are not recorded, nor can they be in most states. Yet it is the note that, as we have seen above, is critical to the right to enforce the mortgage. Assignments of the mortgage (which can be recorded) are largely irrelevant to the right to enforce the note or foreclose the mortgage. And even if the real estate recording system were to be drastically revised to permit recording of notes, the burdens of using it for that purpose would be oppressive, with more than 3,000 local recording jurisdictions, each with its own fee schedule, document standards, and geographic coverage. Surely such a fractionated and diverse set of record-keepers should not be imposed on the national secondary mortgage market.
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Chapter 8. Statutory Impacts on Foreclosure 77 results (showing 5 best matches)
- This sanction has been rigorously imposed. For example, where a mortgagee first obtained a personal judgment against a mortgagor who consented to its entry, the mortgagee was held to have forfeited the right to foreclose on the mortgaged real estate. Moreover, resort to real estate foreclosure has been barred where the creditor first proceeded against chattel security without simultaneously seeking foreclosure of the real estate. Finally, the Ninth Circuit Court of Appeals held that even where a creditor proceeded properly by one action and included all security, real and personal, but failed after the foreclosure sale of the real estate to seek a “fair value” hearing, it forfeited its security interest in the personality.
- One action or security first legislation is hardly an unmixed blessing. Even though it generally may be desirable that the mortgagee foreclose on the encumbered real estate before proceeding against other assets of the mortgagor, most mortgagees probably follow such a course of action anyway, at least when the mortgaged real estate was intended to be the primary security for the loan transaction. Many mortgagees, however, rely primarily on the debtor’s personal net worth rather than on real estate security. Indeed, the mortgage is often a minor part of the loan transaction. In such a setting, it seems unfair to require the lender to foreclose on the real estate before proceeding against the debtor personally.
- Until recently, mortgagees holding security interests in environmentally contaminated real estate were faced with a difficult dilemma created by section 726a and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). Foreclosure and purchase by a mortgagee of contaminated real estate created the concern that it would become liable for massive clean-up costs under CERCLA. On the other hand, section 726a gives the mortgagor the power to force foreclosure of the real estate. Recently enacted section 726.5 permits the mortgagee, subject to certain limitations, to waive its security interest in “environmentally impaired” real estate and proceed against the mortgagee as an unsecured creditor. This election is available to the mortgagee if (1) the costs of cleanup exceed 25% of the fair market value of the real estate (ignoring the impact of the contamination on that value) ...CERCLA liability that stems from taking possession of contaminated real...
- is secured by consensual liens on both realty and personalty, one is confronted with a “mixed collateral” situation, raising the problem of reconciling the application of Article 9 of the California Commercial Code with the well-developed and complex real property anti-deficiency legislation that we have been examining in the preceding material in this section. Prior to 1986, Professors Hetland and Hansen have argued, the real property statutes were dominant in the mixed collateral setting. Consequently, “a creditor who took an interest in even a small quantity of the debtor’s real property subjected the to the protections of the real property system.” real estate foreclosure has been deemed impermissible where the creditor proceeded judicially first against personalty without simultaneously seeking foreclosure of the real estate. ...loan the balance in his bank account, it was held to have violated section 726a and thus to have waived its right to foreclose on the mortgagor’s real...
- The term “single asset real estate” means “real property constituting a single property or project, other than residential real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.” the mortgagee of single asset real estate moves for relief from stay, the debtor must either (1) propose a feasible reorganization plan within 90 days or (2) must begin making monthly interest payments on the secured claim to the mortgagee (calculated at the nondefault rate specified in the note).
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Chapter 9. Some Priority Problems 101 results (showing 5 best matches)
- The Restatement deals with recording act and “chain of title” problems by treating a recorded mortgage containing an after-acquired property provision as unrecorded against those who later take interests in the after-acquired real estate. Thus, for example, under “notice” type recording acts, “the mortgagee’s lien on after-acquired property will be subordinate to the interest of any person who pays value for the real estate and lacks notice of the after-acquired property provision.” However, once the mortgagor acquires additional real estate, the Restatement gives the after-acquired property mortgagee the means to protect itself. The mortgagee acquires this protection by “recording a notice which specifically describes the parcel of after-acquired real estate, refers to the mortgage, and is in a form that provides record notice under local law. When such notice is recorded, the after-acquired property provision becomes part ...of the after-acquired parcel, and interests in that real...
- The great weight of authority rejected the Massachusetts approach. Although the rationale for the results often varied, the majority approach was more pro-chattel mortgagor. When an attached article became a fixture, the majority approach favored the purchase money chattel mortgagee over the prior real estate mortgagee so long as removal of the chattel did not substantially injure the real estate. When the real estate mortgage was subsequent to the purchase money chattel mortgage, the real estate mortgagee prevailed if he had no notice of the chattel mortgage and if he could reasonably have believed that the object in question was within the coverage of his mortgage.
- For the intermediate class of fixtures, Article 9 defers to state real estate law the question of when a good becomes a fixture, and instead adopts in U.C.C. § 9–334 a set of rules to resolve priority conflicts between real estate mortgagees and parties holding conflicting interests arising under Article 9. The default priority rule is that an Article 9 security interest in fixtures is subordinate to the conflicting interest of an “encumbrancer” such as a real estate mortgagee. The drafters recognized, however, that fixture priority for real estate mortgagees would in many cases provides such mortgagees with an undeserved windfall not contemplated in the original mortgage transaction. Thus, U.C.C. § 9–334 provides a series of exceptions to the general rule under which an Article 9 fixture secured party can obtain priority over the conflicting real estate mortgagee. In most instances, to qualify for this priority, the fixture secured party must make a proper “fixture filing.” ...real...
- * * * instrument * * * of such a nature that, in the event of default, the real estate described in the instrument could be subject to the satisfaction of the obligation with the same priority as a first mortgage or a first deed of trust in the jurisdiction where the real estate is located.
- The Uniform Land Transactions Act (ULTA), promulgated in 1975 by the National Conference of Commissioners on Uniform State Laws, but as of this writing not adopted by any state, expressly recognizes the validity of an after-acquired real estate clause except in certain situations where the mortgagor is giving real estate security for residential real estate that he will or does occupy. In the latter situation an after-acquired property clause will not attach to subsequently acquired real estate unless it is contiguous to the parcel described in the mortgage or unless the subsequently acquired property is itself described in the original mortgage.
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Chapter 7. Foreclosure Part 3 45 results (showing 5 best matches)
- Under the Restatement, the “surplus stands in the place of the foreclosed real estate, and the liens and interests that previously attached to the real estate now attach to the surplus.” Restatement Third, Property: Mortgages § 7.4 comment a.
- Suppose that the title is not defective, but the physical quality of the real estate is. To what extent may a judicial foreclosure be set aside when, after the foreclosure sale, the purchaser discovers significant physical defects in the real estate? See Horicon State Bank v. Kant Lumber Co., Inc., 165 Wis. 2d 543, 478 N.W.2d 26 (Ct. App. 1991) (mortgagee that purchased land at foreclosure sale not permitted to invalidate sale on grounds of environmental contamination when a reasonable inspection before sale would have disclosed the problem).
- See, e.g., Cox v. Townsend, 90 Mich. App. 12, 282 N.W.2d 223 (1979); Foreclosure sale of mortgaged real estate as a whole or in parcels, 61 A.L.R.2d 505, 574 § 17.
- A few states require mailed (registered or certified) notice to the “mortgagor,” the record “owner,” and “any person having a lien” on the mortgaged real estate. See N.H. Rev. Stat. Ann. § 479:25. Courts broadly interpret the term “owner” to include recorded lessees. See Snyder v. New Hampshire Sav. Bank, 134 N.H. 32, 592 A.2d 506 (1991).
- See, e.g., Mo. Ann. Stat. § 443.325. Some states require mailed notice to all parties having a record interest in the real estate together and to any other person who has previously recorded a request for it. See, e.g., Ariz. Rev. Stat. § 33–809; Cal. Civ. Code Ann. § 2924(b).
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Chapter 5. Transfer by the Mortgagor and the Mortgagee 54 results (showing 5 best matches)
- For a variety of reasons these concealment strategies often fail. Some mortgagees closely monitor the public records for evidence of new real estate recordings affecting their mortgaged properties. Ownership changes may also become apparent from annual real estate tax statements that the mortgagee receives in its capacity as an escrow agent for real estate taxes and insurance, or when a new casualty insurance policy is issued and the mortgagee’s copy reveals the new owner. Moreover, mortgagees may keep abreast of transfers through a program of regular inspection of the real estate on which they hold mortgages.
- One significant question is whether a sale of mortgaged real estate by installment land contract permits acceleration under the mortgage’s due-on-sale clause. At one time many real estate brokers seem to have assumed (erroneously) that it did not, and they often advised their clients to employ installment contracts to avoid acceleration of the underlying mortgage. The answer depends on the precise wording of the clause in question,
- Occasionally a mortgage contains not merely a due-on-sale clause but a literal prohibition on transfer by the mortgagor without the mortgagee’s consent. The lender might justify this language, in a loan on a hotel or a shopping center for example, by pointing out that it relied heavily on the original mortgagor’s management skill and expertise and was strongly averse to permitting substitution of a different owner of the real estate. If this sort of clause is combined with a prohibition on prepayment, and if the lender refuses to consent to both transfer and prepayment, the borrower is effectively “locked in” to the real estate. It seems quite likely that a court faced with this combination would find that it amounted to an invalid restraint on alienation, and would order the lender to waive one of the clauses, thus permitting either payoff of the mortgage or transfer of the real estate. However, no case has been found that directly confronts this issue.
- Nevertheless, the courts have treated leasehold mortgages as mortgages on real estate in a variety of contexts. Most contemporary mortgages on leasehold interests arise in commercial real estate settings where the mortgagor is often an experienced and sophisticated real estate developer.
- There are three basic methods by which a mortgagor sells mortgaged real estate and the purchaser “takes over” the existing mortgage:
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Chapter 4. Rights and Duties of the Parties Prior to Foreclosure Part 3 49 results (showing 5 best matches)
- See generally Alvin L. Arnold, 1 Real Estate Transactions: Structure and Analysis with Forms, Appendix 5.3, Checklist of Permanent Mortgage Commitment (2013); Andrea M. Mattei, A Due Diligence Checklist Based on Expansive Representations and Warranties, in Commercial Real Estate Financing: Strategies for Changing Markets and Uncertain Times, in ALI-ABA CLE (2012); K.C. McDaniel, Standard Form of Hotel Loan Agreement, Annotated with Introduction, in Modern Real Estate Transactions: Practical Strategies for Real Estate Acquisition, Disposition, and Ownership 1403–1404, in ALI-ABA CLE (2011); Slavich, As if It Isn’t Enough to Have a Non-performing Loan: Dealing with Environmentally Impacted Distressed Assets, 41 Tex. Envtl. L.J. 29 (2010); Alan Wayte, Selected Issues in the Negotiation of Real Estate Financing Documents, in Commercial Real Estate Financing: Strategies for Changing Markets and Uncertain Times 14–16, in ALI-ABA CLE (2012).
- See, e.g., Mattei, supra note 818; Schroeder, supra note 819; Michael J. Virgadamo, Financing of Commercial Real Estate, in Florida Real Property Complex Transactions (6th ed.2011).
- Perhaps out of an excess of caution, some mortgagees not only record an assignment of rents in the real estate records, but also purport to take and perfect a Uniform Commercial Code security interest in the rents as well. This “belt and suspenders” approach stems from a concern that a court might deem rents to be “personalty” such that an executed assignment of rents recorded in the real estate records will not afford adequate protection to the mortgagee. However, this concern is misplaced. By its terms, UCC Article 9 does not apply “to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder.” U.C.C. § 9–109(d)(11). See also In re Stanley Station Associates, L.P., 139 B.R. 990 (Bankr. D. Kan. 1992); In re Carley Capital Group, 128 B.R. 652 (Bankr. W.D. Wis. 1991) (applying North Carolina law); Matter of Hollinrake, 93 B.R. 183 (Bankr. S.D. Iowa 1988); First Federal Sav. of Arkansas, F.A. v. City Nat. Bank of Ft. Smith, Ark., 87 B.R....
- See Restatement Third, Property: Mortgages § 4.1(c) (“[A] mortgagee who obtains possession of the mortgaged real estate may retain it until the mortgage is redeemed or foreclosed if: (1) the mortgagor voluntarily delivers possession to the mortgagee; or (2) the mortgagee enters after abandonment by the mortgagor; or (3) the mortgagee enters after purchasing the real estate in good faith at an invalid foreclosure sale.”); 7 Tex. L. Rev. 170 (1928); 18 N.C. L. Rev. 61 (1939).
- See generally John C. Murray & Kenneth R. Jannen, Public and Private Sales of Real Property by Federal Court Receivers, ACREL Papers (March 2011); Morris A. Ellison, Lawrence M. Dudek & Samuel H. Levine, ’Tis Better to Receive—The Use of a Receiver in Managing Distressed Real Estate, ACREL Papers (October 2009).
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Chapter 11. Government Intervention in the Mortgage Market 23 results (showing 5 best matches)
- Real estate investment trusts.
- However, in 1982 the Garn-St. Germain Act removed all statutory restrictions on real estate lending by national banks. This situation continued until 1993, when the banking agencies, acting under the authority of the FDIC Improvement Act of 1991, instituted a uniform system of real estate lending regulations for all federally-insured and federally-chartered banks and savings associations.
- Unlike savings associations and banks, life insurance companies and pension funds are not depository institutions. Instead, their assets come from premium payments on life policies and contributions to various retirement and annuity programs. These comprise a relatively stable and predictable source of funds as compared with savings deposits. Hence, these companies have a preference for long-term large-dollar investments, such as mortgage loans on commercial real estate. They are regulated only at the state level by insurance commissions or departments, and the legal constraints on their lending are not very restrictive. Moreover, in most jurisdictions they are permitted to invest in real estate financings other than standard mortgage loans. These include sale-leasebacks, sale-salebacks, leasehold mortgages, and other innovative financing methods. These investments are often called “basket” loans since the applicable law or regulation usually provides for a maximum percentage of...
- Some real estate investment trusts are also active in the construction lending field. On the other hand, federally sponsored agencies, pension funds, and life insurance companies, because they lack the necessary local offices and personnel, are almost totally absent from construction lending.
- FHA’s mortgage insurance programs are much more complex than the activities of VA and the PMIs. The latter confine themselves almost exclusively to mortgages on homes (i.e., one-to-four family buildings) and condominiums, while FHA has a wide range of programs covering homes, condominiums, cooperatives, apartment buildings, hospitals, and other types of real estate. FHA’s programs are commonly identified by the relevant sections of the National Housing Act: Section 203(b) for ordinary home loans, Section 207 for apartments, Section 234 for condominiums, and so on.
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Chapter 3. Mortgage Substitutes 73 results (showing 5 best matches)
- While it is conceivable that a grantor could sell his interest in his real estate and retain possession as a lessee, the retention of possession by the grantor at least indicates that he retained some interest in the deeded real estate. Moreover, when retention of possession is coupled with substantial improvements to the real estate, the grantor’s case becomes even stronger. In any event, when retention of possession is coupled with favorable evidence based on the two factors discussed previously, the grantor’s case becomes strong indeed.
- The Restatement defines the conditional sale as a “deed purporting to be an absolute conveyance of real estate accompanied by a written agreement conferring on the grantor a right to purchase the real estate.”
- The sale and leaseback is a commonly used method of financing commercial real estate transactions. Although the transactions are often complex, in its common form, an owner sells and conveys real estate to an investor-purchaser (often an institutional lender) who leases it back to the seller on a long-term lease. Often, the lease grants lessee-seller an option to repurchase the real estate upon the expiration of the lease.
- In sum, as the preceding text in this section illustrates, the proper method of perfection of such a security interest has been controversial. Some cases hold that perfection can be accomplished by recording in the real estate records; others that perfection can be accomplished by filing a UCC–1 financing statement; and still others that both real estate and Article 9 financing are necessary to a complete perfection.
- Assuming that the secured creditor files under Article 9, should it still record an assignment of the vendor’s contract interest in the real estate records? Even though such a recording is unnecessary and irrelevant under Article 9, recording in the real estate records is important and desirable for three reasons:
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Chapter 11. Government Intervention in the Mortgage Market Part 2 29 results (showing 5 best matches)
- 69 Fed. Reg. 1904 (Jan. 13, 2004), amending 12 C.F.R. §§ 7.4007 to 7.4009 (non-real estate loans); 12 C.F.R. §§ 34.3 to 34.4 (real estate loans).
- See Jordan, Ups and Downs: A REIT Dilemma, 73 Fla. B.J. 54 (July/Aug. 1999); Witner, REITs: The Revolution in Real Estate Financing, 22 Real Est. L.J. 248 (1994); Winston, Choosing Between Publicly Traded Partnerships and Real Estate Investment Trusts, 2 Prac. Real Est. Law. 19 (No.2, Mar. 1986).
- See Gunning and Roegge, Contemporary Real Estate Financing Techniques: A Dialogue on Vanishing Simplicity, 3 Real Prop. Prob. & Tr. J. 322, 325 (1968).
- See Hu, Secondary Market: The American Model, Mortgage Banking, Apr.1991, at 14; Bradner, The Secondary Mortgage Market and State Regulation of Real Estate Financing, 36 Emory L.J. 971 nn. 49–68 (1987); Malloy, The Secondary Mortgage Market: A Catalyst for Change in Real Estate Transactions, 39 Sw. L.J. 991 nn.48–62 (1986).
- Published discussions of the secondary mortgage market, which is the principal governmental support system, include Ann Graham, Introduction: Reforming the Secondary Mortgage Market, 35 Hamline L. Rev. 327 (2012) (symposium; see also other articles in this issue); Bradner, The Secondary Mortgage Market and State Regulation of Real Estate Financing, 36 Emory L.J. 971 (1987); Malloy, The Secondary Mortgage Market: A Catalyst for Change in Real Estate Transactions, 39 Sw. L.J. 991 (1986).
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Chapter 4. Rights and Duties of the Parties Prior to Foreclosure Part 2 56 results (showing 5 best matches)
- Normally, a mortgagee is not responsible to third parties, private or governmental, for the physical condition of the mortgaged real estate or injuries that occur on it. Only by becoming a mortgagee in possession or by acquiring title through foreclosure or a deed in lieu does a mortgagee assume the normal responsibilities of an owner or possessor of real estate.
- The foregoing decisions and others like them made many lenders reluctant to lend on the security of real estate that was or might be contaminated and to foreclose or otherwise acquire it. If someone was personally liable for the mortgage obligation and if state anti-deficiency or one-action legislation did not present an obstacle, mortgagees were inclined to waive their rights in their real estate security in favor of suing on the underlying obligation. On the other hand, if the mortgagors were insolvent, the underlying obligation was non-recourse, or state law barred any action on it, mortgagees were tempted to abandon any attempt to proceed against their real estate security. Mortgagees clearly were uncomfortable with this state of affairs.
- In the context of the recent real estate crisis, however, some commentators have advocated that receivership can be an effective way to dispose of real estate—and particularly, that it may in some cases provide a more effective way of disposing of mortgaged real property than the foreclosure process. Under current foreclosure law in all American jurisdictions, a foreclosure sale is a “distress sale,” i.e., a public auction sale on the courthouse steps (or at some other public place). Foreclosure by public sale is traditionally justified as a means to protect the mortgagor’s equity in the mortgaged property, particularly by comparison to the historical approach under which a defaulting borrower simply forfeited its interest in the mortgaged property (and any equity the borrower may have accumulated either through principal reduction or market appreciation). ...mortgaged commercial real property could readily market that property to potential buyers in the context of operating the...
- [B]ecause it protects the residential mortgagor from eviction and having to pay rent to the receiver prior to foreclosure, it is consistent with the traditional lien theory concern for protecting the homeowner’s right to possession prior to foreclosure. Nor is it unduly protective of the commercial mortgagor who is not a landlord. Those who lend to manufacturers and similar non-landlord mortgagors rarely rely on potential rental income from the mortgaged real estate as a significant source of security. Moreover, to allow a receiver to impose a rental obligation for the continued use of such real estate could have an especially detrimental impact on vulnerable third parties. A receiver who takes possession of rental real estate will almost always continue to operate the building in the same manner. Consequently, there will be relatively minor impact on tenant and other third party expectations. Where the mortgagor is a manufacturer or is otherwise operating a business on the...
- Or, as Professor Glenn once stated, “[t]he proper question is, what is covered by the mortgage? If it covers the real estate alone, then the only business the receiver can properly operate is the business of a landlord.” The Restatement provides that “the receiver has no general authority to take possession of all of mortgagor’s assets for purposes of satisfying creditors out of those assets or to liquidate or reorganize mortgagor. To the extent that the business housed on the mortgaged real estate does not generate revenue ‘payable by a lessee, licensee, or other person for the right to possess, use, or occupy the real property of
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Chapter 4. Rights and Duties of the Parties Prior to Foreclosure 51 results (showing 5 best matches)
- The Restatement defines the term “rents, issues and profits” broadly to include “the proceeds payable by a lessee, licensee, or other person for the right to possess, use or occupy the real property of another.” Thus, for example, under the Restatement approach, hotel room revenue qualifies as rents from real estate. This approach is sensible because like the lease revenues received by an owner-mortgagor of an office building or a shopping center, the hotel room revenues collected by an owner-mortgagor of a hotel represent income derived primarily from granting others the right to occupy and use real estate. Likewise, the Uniform Assignment of Rents Act defines “rents” to include sums payable for the right to possess or occupy the real property of another person, even if the occupant does not technically constitute a “tenant” under real property law.
- As we have seen, mortgagees are understandably insistent that mortgagors carry casualty insurance on the mortgaged real estate and that insurance premiums be paid promptly. Insurance provides protection against the partial or complete destruction of the mortgage security. Mortgagees also have special concern as to real estate taxes and assessments because, as Professor Durfee once aptly pointed out, “in most tax systems * * * the burden of the ordinary tax on land and the burden of special assessments for local improvements rests on both mortgagor and mortgagee in the sense that unless these charges are satisfied by someone before the axe falls the interest of both parties will be rubbed out. The state goes after the land and its claim overrides In other words, a “first” mortgage on real estate will be eliminated by a sale under a subsequently arising real estate tax lien. Hence, virtually all mortgages contain clauses specifically imposing the duty to pay taxes on the mortgagor...
- The Restatement concurs, broadly defining waste as including acts by which the mortgagor (1) physically changes the real estate, whether negligently or intentionally, in a manner that reduces its value; (2) fails to maintain and repair the real estate in a reasonable manner, except for repair of casualty damage or acts of third parties not the fault of the mortgagor; (3) fails to pay before delinquency property taxes or governmental assessments secured by a lien having priority over the mortgage; or (4) materially fails to comply with covenants in the mortgage respecting the physical care, maintenance, construction, demolition, or insurance against casualty of the real estate or improvements on it.
- In borderline cases, however, this “realty-personalty” line is often difficult to draw. For example, there is case authority that gate receipts from a horse race track are derived primarily from entertainment services provided by the owner-mortgagor to race track customers and thus do not constitute rents, issues or profits of real estate. By contrast, it has been held that because parking lot receipts represent fees paid for the right to use real estate, they constitute rents for purposes of an assignment An especially troubling issue in this regard has been the treatment of hotel room charges. A majority of courts have held that such proceeds are personalty and not encompassed in an assignment of the rents, issues and profits of real estate.
- If a mortgagee had already completed a foreclosure sale before bankruptcy, the real property belongs to the foreclosure sale purchaser, and rents accruing thereafter would not constitute property of the bankruptcy estate. But if no foreclosure sale has occurred prior to bankruptcy—and thus if equitable ownership of the real property remains in the debtor/mortgagor—then rents accruing during bankruptcy would seem to fit squarely within the broad concept of “property of the estate” as defined in Bankruptcy Code section 541(a). Nevertheless, in an attempt to boost their leverage in bankruptcy, mortgage lenders whose documents contained “absolute” assignments of rents began to argue that by virtue of the “absolute” assignment, “title” to the post-bankruptcy rents rested in the assignee such that the rents did not constitute property of the estate.
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Chapter 8. Statutory Impacts on Foreclosure Part 4 36 results (showing 5 best matches)
- The term means “real property constituting a single property or project, other than residential real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental thereto.” 11 U.S.C.A. § 101(51B). The term has been interpreted to include raw land even though it generated no income, In re Oceanside Mission Associates, 192 B.R. 232, 28 Bankr. Ct. Dec. (CRR) 703, 35 Collier Bankr. Cas. 2d (MB) 336, Bankr. L. Rep. (CCH) ¶ 76897 (Bankr. S.D. Cal. 1996). Even where the business activities conducted by the debtor are closely related to the debtor’s ownership of the land, courts have sometimes concluded that the debtor’s business activities were sufficiently “substantial” to prevent characterization of the land as single asset real estate. See, e.g., In re Scotia...
- For example, in In re Highlands Group of Brunswick, LLC, 57 Bankr. Ct. Dec. (CRR) 52, 2012 WL 5385633 (Bankr. E.D. N.C. 2012), a single-asset debtor filed a chapter 11 with the ultimate goal of surrendering the property. The court held that even in the SARE context, this was not an illegitimate use of the bankruptcy process, noting that the fact that guarantors might benefit from the process if they could obtain favorable valuation of the collateral did not by itself establish bad faith. Likewise, in In re Crown Village Farm, LLC, 415 B.R. 86 (Bankr. D. Del. 2009), the court held that a Chapter 11 SARE debtor filed in good faith, even though the debtor proposed to liquidate the real estate, because the debtor’s strategy was to maximize the estate’s value and the then-current state of the real estate market meant that speed in disposing of the property was undesirable.
- In re LaFata, 483 F.3d 13, 57 Collier Bankr. Cas. 2d (MB) 1430, Bankr. L. Rep. (CCH) ¶ 80906 (1st Cir. 2007) (modification permitted where debtor’s residence was primarily located on an adjacent lot and merely encroached on mortgaged real estate); In re Potts, 421 B.R. 518, Bankr. L. Rep. (CCH) ¶ 81666 (B.A.P. 8th Cir. 2010) (modification permitted where mortgage covered both home and separate parcel used for grazing and growing crops); In re Bulson, 327 B.R. 830, 54 Collier Bankr. Cas. 2d (MB) 819 (Bankr. W.D. Mich. 2005) (modification allowed where mortgaged real estate contained both a structure occupied by debtors as principal residence and a separate structure occupied by a mother of one of the debtors); In re Bookout, 231 B.R. 306, 34 Bankr. Ct. Dec. (CRR) 71, 41 Collier Bankr. Cas. 2d (MB) 853 (Bankr. E.D. Ark. 1999) (judicial lien on additional 60 acres constitutes additional security); In re Dinsmore, 141 B.R. 499, 27 Collier Bankr. Cas. 2d (MB) 785, Bankr. L. Rep. (CCH) ¶...
- See, e.g., In re Jamaica House, Inc., 31 B.R. 192 (Bankr. D. Vt. 1983) (stay continuation conditioned upon debtor’s payment of real estate taxes and insurance premiums).
- This has created some ambiguity in the context of classifying hotel properties. For example, in In re Iowa Hotel Investors, LLC, 464 B.R. 848, 55 Bankr. Ct. Dec. (CRR) 218, 66 Collier Bankr. Cas. 2d (MB) 1606 (Bankr. N.D. Iowa 2011), the court concluded that a debtor owning and operating a hotel was not operating “single asset real estate” where the hotel provided an array of services and had separate conference facilities that functioned independently from its core business of providing sleeping rooms. By contrast, in In re City Loft Hotel, LLC, 465 B.R. 428, 56 Bankr. Ct. Dec. (CRR) 9 (Bankr. D. S.C. 2012), the court concluded that the debtor’s hotel qualified as single-asset real estate (despite the provision of hotel services) where the hotel was operated by a different entity.
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Chapter 5. Transfer by the Mortgagor and the Mortgagee Part 3 42 results (showing 5 best matches)
- Participants often argue that the lead lender owes a fiduciary duty to them. The issue can arise in two distinct contexts. First, conflicts may arise between the lead lender and the participants because the characteristics of the underlying borrower and the real estate never matched the participants’ beliefs or assumptions. For example, the borrower may have had weaker credit, less real estate management experience, lower net worth, and a poorer track record in repaying past loans than the participants understood. Similarly, the real estate may have had a lower value or a lower rate of occupancy by tenants, been in a more risky location, or been more difficult to develop than the participants realized.
- The second situation is the case of the suit or administrative proceeding filed by a third party that has the potential to devalue or diminish the real estate, the improvements on it, or the lien held by the assignee. If no assignment is recorded, it is likely that the assignee will get no notice, but will still be bound by the outcome of the action, quite possibly to the assignee’s great detriment.
- For the text of § 5.13, see Nelson, Whitman, Burkhart & Freyermuth, Real Estate Finance Law, Sixth Edition, Practitioner Treatise, Vol. 1.
- Cunningham and Tischler, Transfer of the Real Estate Mortgagor’s Interest, 27 Rutgers L. Rev. 24, 25 (1973).
- This amount has been aptly termed the “basic bargain price.” See Storke and Sears, Transfer of Mortgaged Property, 38 Cornell L.Q. 185, 187 (1953); Cunningham and Tischler, Transfer of the Real Estate Mortgagor’s Interest, 27 Rutgers L. Rev. 24 (1973).
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Chapter 7. Foreclosure Part 2 34 results (showing 5 best matches)
- Bureau of Consumer Financial Protection, Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X), Final Rule; Official Interpretations, 78 Fed. Reg. 10696, 10790 (Feb. 14, 2013); as amended by Amendments to the 2013 Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), Final Rule; Official Interpretations, 78 Fed. Reg. 44686 (July 24, 2013); as further amended by Amendments to the 2013 Mortgage Rules Under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X), and the Truth in Lending Act (Regulation Z), Final Rule, 78 Fed. Reg. 60382 (Oct. 1, 2013); as further amended by Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), Interim Final Rule, 78 Fed. Reg. 62993 (Oct. 23, 2013).
- Bureau of Consumer Financial Protection, Mortgage Servicing Rules Under Real Estate Settlement Procedures Act (Regulation X), Final Rule; Official Interpretations, 78 Fed.Reg. 10696, 10790 (Feb. 14, 2013); as amended by Amendments to the 2013 Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), Final Rule; Official Interpretations, 78 Fed. Reg. 44686 (July 24, 2013); as further amended by Amendments to the 2013 Mortgage Rules Under the Equal Credit Opportunity Act (Regulation B), Real Estate Settlement Procedures Act (Regulation X), and the Truth in Lending Act (Regulation Z), Final Rule, 78 Fed. Reg. 60382 (Oct. 1, 2013); as further amended by Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), Interim Final Rule, 78 Fed. Reg. 62993 (Oct. 23, 2013).
- Even if title examiners could be convinced that a foolproof waiver existed, it probably would be ineffective against holders of subordinate interests in the mortgaged real estate. If a presumption exists against waiver and if a party must be made aware of the rights she is waiving, how can subsequent grantees of the real estate or junior mortgagees waive their rights? They are not parties to the original mortgage transaction, but they have a significant financial stake in the mortgaged property. It could be argued that these parties take their interests subject to matters of record and that they, therefore, implicitly consent to the terms of previously recorded documents.
- When a foreclosure sale produces surplus proceeds, the rules governing who gets the surplus and in what order are generally clear. The major underlying principle is that the surplus represents the remnant of the equity of redemption and the security that the foreclosure eliminated. Consequently, the surplus stands in the place of the foreclosed real estate and the liens and interests that previously attached to that real estate now attach to the surplus.
- Bureau of Consumer Financial Protection, Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation X), Final Rule; Official Interpretations, 78 Fed. Reg. 10696, 10790 (Feb. 14, 2013); 12 C.F.R. § 1024.41(a).
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Chapter 5. Transfer by the Mortgagor and the Mortgagee Part 4 49 results (showing 5 best matches)
- Mortgage assignments are frequently preceded by contracts of sale between the assignor and assignee. See, e.g., United Mortg. Corp. v. Plaza Mortg. Corp., 853 F. Supp. 311 (D. Minn. 1994). This book does not treat such contracts in depth, but good discussions include Stein, Mortgage Loan Assignments: A Primer in Two Parts, Prac. Real Estate Law. 45 (July 1997) and 49 (Sept. 1997); Ellis & Lowry, A Comprehensive Note Purchase Guide (with Forms), Part I, Prac. Real Estate Law. 45 (July 1987); Part II, Prac. Real Estate Law. 49 (Sept.1987).
- See generally Nelson, Whitman, Burkhart & Freyermuth, Real Estate Transfer, Finance and Development 1209–25 (8th ed. 2009); Committee on Leases, Ground Leases and Their Financing, 4 Real Prop. Prob. & Tr. J. 437, 438 (1969).
- See, e.g., Harbel Oil Co. v. Steele, 83 Ariz. 181, 184–86, 318 P.2d 359, 361 (1957) (assignment of lease as security for a loan and sublease back to lessee deemed to be a real property mortgage which could only be foreclosed by judicial action); Fidelity Trust Co. v. Wayne County, 244 Mich. 182, 188, 221 N.W. 111, 112, 59 A.L.R. 698 (1928) (statute imposing tax on real estate mortgages held applicable to a mortgage on a term for years); Abraham v. Fioramonte, 158 Ohio St. 213, 222–25, 48 Ohio Op. 159, 107 N.E.2d 321, 326–27, 33 A.L.R.2d 1267 (1952) (leasehold could not be made subject of chattel mortgage, but must be mortgaged in accordance with formalities associated with real estate mortgages).
- For a comprehensive treatment of the provisions of the Act and the Regulation with regard to window period loans, see Nelson and Whitman, Real Estate Finance Law § 5.24, at 505–11 (5th ed.).
- See Nelson, Whitman, Burkhart & Freyermuth, Real Estate Transfer, Finance and Development 216–217 (8th ed.2009).
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Chapter 2. The Necessity and Nature of the Obligation 23 results (showing 5 best matches)
- Since most real estate development entities are “single-asset” borrowers that own nothing except the particular real estate project, the personal liability of the borrower entity has little meaning; it will be unable to respond with money if its sole asset, the real estate project, is in financial difficulty or has already been foreclosed. Hence, to be useful to the lender, the nonrecourse carve-outs must be guaranteed by some or all of the individual principals of the entity.
- Indeed, with such an obligation the whole system of mortgage enforcement would break down. There are several reasons for this. First, in the event of a foreclosure sale, the purchaser would presumably bid what the real estate is worth. However, unless the mortgage debt is reducible to a money amount, it would be impossible to determine a deficiency or to allocate surplus among junior lienors, if any, or to the mortgagor. Second, creditors of the mortgagor would face the same uncertainty in attempting to enforce a judgment against the mortgaged real estate. Third, mortgagees would have difficulty in assigning the mortgagee’s interest, since prospective investors would be unable to determine its value with any accuracy. Finally, mortgagors would find it extremely difficult to obtain second mortgage financing. Because of the inability to ascertain the amount of the prior lien, lenders would have substantial difficulty in determining the value of the mortgagor’s equity for loan...
- There are also cases in which the mortgagee has been guilty of fraud or other breach of duty, but has nonetheless disbursed the proceeds of the loan to the mortgagor. While the wrong committed by the mortgagee might give the mortgagor a defense on the note (and hence the mortgage), such a mortgagor would surely have an equitable duty to make restitution of the loan funds received. The mortgagee may have an equitable lien on the real estate, with a priority equivalent to that of the original mortgage, to assist in collecting those funds. See Union Trust Co. v. Biggs, 153 Md. 50, 137 A. 509 (1927).
- Such a clause may be considered essential for federal income tax purposes to a real estate venture in which outside investors buy shares. it is much more natural to construe it as negating the existence of any independent obligation except insofar as the land itself can be looked upon as owing a “real” obligation.
- However, while such clauses are seemingly beneficial to lenders, they may come back to bite them in the long run. If the principals own multiple real estate entities, and another of those entities enters bankruptcy, the presence of such a clause would seem to increase substantially the risk that a bankruptcy court will order a substantive consolidation of the entities, much to the detriment of lenders holding loans to entities that are still solvent.
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Chapter 3. Mortgage Substitutes Part 2 54 results (showing 5 best matches)
- Under the Restatement, security intent “may be inferred from the totality of the circumstances, including the following factors: (1) statements of the parties; (2) the presence of a substantial disparity between the value received by the grantor and the fair market value of the real estate at the time of the conveyance; (3) the fact that the grantor retained possession of the real estate; (4) the fact that the grantor continued to pay real estate taxes; (5) the fact that the grantor made post-conveyance improvements to the real estate; and (6) the nature of the parties and their relationship prior to and after the conveyance.” Restatement Third, Property: Mortgages § 3.2(b). See Woznicki v. Musick, 119 P.3d 567 (Colo. App. 2005) (overruled on other grounds by, Trattler v. Citron, 182 P.3d 674 (Colo. 2008)) (endorsing the foregoing factors, but holding that evidence was insufficient to find an equitable mortgage); Stinson v. Hall, 938 So. 2d 887 (Miss. Ct. App. 2006) (delineating...
- See generally Homburger and Andre, Real Estate Transactions and the Risk of Recharacterization in Bankruptcy Proceedings, 24 Real Prop., Prob. & Tr. J. 95 (1989).
- Bellon v. Malnar, 808 P.2d 1089 (Utah 1991) (abrogated by, Commercial Real Estate Inv., L.C. v. Comcast of Utah II, Inc., 2012 Ut. 49, 285 P.3d 1193 (Utah 2012)); Morris v. Sykes, 624 P.2d 681 (Utah 1981); Kay v. Wood, 549 P.2d 709 (Utah 1976); Jacobson v. Swan, 3 Utah 2d 59, 278 P.2d 294 (1954) (abrogated by, Commercial Real Estate Inv., L.C. v. Comcast of Utah II, Inc., 2012 Ut. 49, 285 P.3d 1193 (Utah 2012)).
- [prior case law] * * * teaches that judgment liens entered after [vendee] acquired equitable title to the real estate conferred upon [lienholders] only such right in the real estate as [vendor] then possessed. This means that the [lienholders] acquired [vendor’s] right to receive installment payments from [vendee]. [This right] was not chargeable to [vendee] unless and until [vendee] became aware of the existence of the liens. * * * This means that, at a minimum, if [vendee] had made payments to [vendor] after she discovered the existence of the liens, she would have been liable to the [lienholders] for the same amount if [vendor] did not subsequently satisfy his debts to the [lienholders].
- For analysis of the Indiana situation, see Bepko, Contracts and Commercial Law, 8 Ind. L. Rev. 116, 117–20 (1974); Polston, Survey of Recent Developments in Indiana Law—Property, 10 Ind. L. Rev. 297, 298 n. 4 (1976); Strausbaugh, Exorcising the Forfeiture Clause from Real Estate Conditional Sales Contracts, 4 Real Est. L.J. 71 (1975).
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Chapter 5. Transfer by the Mortgagor and the Mortgagee Part 5 32 results (showing 5 best matches)
- Under U.C.C. § 9–203(g), a transfer of the right to payment (i.e., ownership) of the note automatically transfers the right to any accompanying security interest in real or personal property, including a real estate mortgage.
- See Essay, The Aftermath of Penn Square Bank: Protecting Loan Participants from Setoffs, 18 Tulsa L.J. 261, 274 (1982), for a participation agreement form; Arnold, Modern Real Estate and Mortgage Forms 4 to 29 (1970), for a participation agreement intended for use on a construction loan; Tockarshewsky, Loan Participations Are Meaningful Commitments, 8 No. 3 Real Est. Rev. 61 (Fall 1978).
- The details of differences between the two versions vary, as do the actual enactments of the states. Space does not permit an elaborate discussion of these variations. See Comment: The Uniform Consumer Credit Code and Real Estate Financing—A Square Peg in a Round Hole, 28 U. Kan. L. Rev. 601, 615–16 (1980).
- The text of the CFPB rule, High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (Regulation X), appears at 78 Fed. Reg. 6856 (Jan. 31, 2013).
- See § 11.1, infra, for a more complete description of servicing. Note that the Real Estate Settlement Procedures Act (RESPA) requires notice to the borrower of any transfer of servicing of a residential mortgage loan; see text at note 958 infra.
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Chapter 12. Financing Real Estate Construction Part 2 60 results (showing 5 best matches)
- ABA Sec. of Real Prop., Prob. & Trust Law, The Lawyer’s Role in Financing the Real Estate Development 36 (Prob. & Prop. Cassette Series, Vol. 1, No. 3, 1975). See also Goldman v. Connecticut General Life Ins. Co., 251 Md. 575, 248 A.2d 154 (1968).
- See Walsh, A Practical Guide to Mortgage Loan Commitments, 8 Real Est. L.J. 195 (1980); Garfinkel, The Negotiation of Construction and Permanent Loan Commitments (Part 1), 25 Prac. Law. 13, 13 (Mar. 1979); Garfinkel, The Negotiation of Construction and Permanent Loan Commitments (Part 2), 25 Prac. Law. 37, 37 (Apr. 1979); Robert Kratovil, Modern Real Estate Documentation 185–97 (1975); ALI-ABA, Modern Real Estate Transactions 267 (5th ed. 1984) (document prepared by Noel R. Nellis); Ridloff, A Sample Construction Loan Commitment, 10 Real Est. Rev. 87 (No. 4, 1981); Lester v. Resolution Trust Corp., 994 F.2d 1247, 1251 (7th Cir. 1993); Hunter v. Sterling Bank, 750 F. Supp. 2d 530, 534 (E.D. Pa. 2010) (outlines some conditions in loan commitment); Bennington State Bank v. Kan-Tex Culinary, L.L.C., 2009 WL 801783 (D. Kan. 2009) (not reported in F.Supp.2d).
- Jeminson v. Montgomery Real Estate and Co.,
- Construction Funding: The Process of Real Estate Development, Appraisal, and Finance 172 (Nathan S. Collier et al. eds. 4th ed.2008).
- Real Estate Lending Standards, 57 Fed. Reg. 62890 (Dec. 31, 1992), codified in 12 C.F.R. Pt. 34, Subpt. D, App. A (national banks); 12 C.F.R. Pt. 208, App. C (state banking institutions in the Federal Reserve System); 12 C.F.R. Pt. 365, Subpt. A, App. A (FDIC-insured state-chartered lenders); 12 C.F.R. §§ 560.100, 560.101, app. (federal savings associations). See also Proposed Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, 71 Fed. Reg. 74580 (Dec. 12, 2006) (promulgated by the same agencies). OTS ceased to exist on October 19, 2011. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, it was merged into OCC, FDIC, and the Fed.
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Chapter 12. Financing Real Estate Construction 31 results (showing 5 best matches)
- Equitable liens also can be asserted against improved real estate. If the claimant contributed to an improvement on the real estate, the equitable lien is a substitute for a conventional mechanic’s lien. Alternatively, a lender may request an equitable lien.
- In addition to covering the “hard costs,” such as materials and direct labor, the construction lender may be willing to cover certain “soft costs,” such as legal and accounting services related to the project, insurance, real estate taxes, fees for a permanent loan commitment, and possibly interest on the construction loan itself. Other negotiable points include whether the construction loan will cover any portion of the land acquisition or site development costs, such as the extension of utility lines, roads and streets, and storm and sanitary sewers. Alternatively, the lender may agree to lend the lesser of a specified percentage of the prospective appraised value of the property when construction is complete or of the project’s total cost, including holding costs, such as loan interest and real estate taxes, and a contingency fund for unforeseen events and cost overruns.
- For many years, institutional lenders were subject to rather rigid limits on loan-to-value ratios, amortization, and other features of real estate loans, but the restrictions have been substantially relaxed. The most significant limitation today is on loan-to-value ratios, but even that limitation is not completely mandatory. The “Interagency Guidelines for Real Estate Lending Policies,” which was jointly promulgated by the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision,
- The basic idea of a mechanic’s lien is that a person whose work or materials improve real estatethat real estate.
- If the real estate is transferred by the mortgagor to a grantee, advances subsequently made by the mortgagee to the grantee are not secured by the mortgage, even if the grantee expressly assumed the mortgage.
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Chapter 6. Discharge of the Mortgage Part 2 42 results (showing 5 best matches)
- See Willis V. Carpenter & Blair E. Daniels, Short Sale Addendum, Colo. Real Est.Prac. Form 8–19 (2012); Dunaway, Babbitt, Gerth, and McGrane, Law of Distressed Real Estate § 3B:8; Miller, Short Sales Overview with an Emphasis on Broker Issues, 26 No. 3 Prac. Real Est. Law. 9 (2010); Gerald J. Robinson, Provisions for Short Sale in Contract for Sale of Residence, Real Est. Forms; Vacco, supra note 398.
- Brumfield, The “Short Cut” to the Stabilization of the Underwater Housing Market: How the New FHFA Short Sale Guidelines Promote Economic Efficiency, 41 Real Est. L.J. 456 (2013); Real Estate Economy Watch.com, Short Sale and Foreclosure Discounts Converge, available at http://www.realestateeconomywatch.com/2012/05/short-sale-and-foreclosure-discounts-converge/.
- Hetland, California Real Estate Secured Transactions 197 (1970).
- See Kinard v. Fleet Real Estate Funding Corp., 319 S.C. 408, 461 S.E.2d 833 (Ct. App. 1995) (penalty of $72,500, one-half of the mortgage amount, approved where no discharge had been recorded at time of trial, 21 months after payoff).
- See Annot., Unaccepted tender as affecting lien of real estate mortgage, 93 A.L.R. 12, 50.
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Table of Cases Part 3 27 results (showing 5 best matches)
- National Real Estate Ltd. Partnership II, In re ………… 779
- North Houston Intern., L.L.C. v. PW Real Estate Investments, Inc. ………… 1054
- Oceanview/Virginia Beach Real Estate Associates, In re ………… 204
- Palcar Real Estate Co. v. Commissioner of Internal Revenue ………… 750
- Real Estate-Land Title & Trust Co. v. Homer Bldg. & Loan Ass’n ………… 213
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Preface 4 results
- Indeed, the past seven years produced an upheaval in the world of real estate finance not experienced since the Depression era. Residential and commercial real estate values plummeted. Default and foreclosure rates skyrocketed, particularly in the residential sector. Fannie Mae and Freddie Mac became insolvent, received an enormous public bailout, and were placed in federal conservatorship—yet are now once again earning enormous profits and have largely repaid the public bailout. Enormous sums have been spent to implement mortgage modification programs designed to keep distressed borrowers in their homes, yet substantial doubt remains about the overall effectiveness of these efforts.
- We are highly pleased to welcome two new co-authors in this Sixth Edition: Professors Ann Burkhart of the University of Minnesota and Wilson Freyermuth of the University of Missouri. Both are long-time colleagues and friends of Nelson and Whitman, the authors on the past four editions. Ann and Wilson are both outstanding scholars who have published widely in the areas of property and real estate finance. They are among the nation’s top academics in their fields. Moreover, they are also the co-editors with Nelson and Whitman on the Eighth Edition of
- Further, while the law governing foreclosure of personal property security enjoys nationwide consistency under UCC Article 9, the law of real estate finance remains frustratingly nonuniform. While state courts and legislatures have begun experimenting with the implementation of mediation and loss mitigation programs designed to facilitate mortgage modification for distressed borrowers, these efforts remain haphazard. The crisis has prompted the Uniform Law Commission to renew its efforts to promote a uniform law governing foreclosure, but the outlook for its success remains quite unclear.
- More significantly, the foreclosure crisis produced by this upheaval has revealed a real estate finance system that is significantly broken, both for borrowers and lenders. On the one hand, the crisis has exposed that rampant securitization produced appallingly inadequate recordkeeping and servicing practices. Original promissory notes that ostensibly were to end up in securitization pools were frequently lost, destroyed, or improperly negotiated, raising unnecessary legal doubt regarding the ability to enforce the underlying obligation of the borrowers. The MERS system—which conceptually might have functioned to streamline the securitization process by avoiding the need for a recorded chain of mortgage assignments—became a lightning rod (quite justifiably so, in some respects) to the extent that it permitted MERS members to institute foreclosures in the name of MERS rather than in the name of the actual beneficial owner of the mortgage note, contributing to a perceived lack of...
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Chapter 10. Subrogation, Contribution and Marshaling 11 results (showing 5 best matches)
- In this last illustration, there is a wide divergence of opinion as to the extent to which ME3’s knowledge or notice of ME2’s lien will deprive ME3 of the benefits of subrogation. The Restatement takes the broad view that ME3 should be entitled to subrogation even if ME3 had actual knowledge of ME2, provided that ME3 “reasonably expected to receive a security interest in the real estate with the priority of the mortgage being discharged, and if subrogation will not materially prejudice the holders of intervening interests in the real estate.”
- For the text of §§ 10.2 to 10.8 and 10.10 to 10.15, see Nelson, Whitman, Burkhart & Freyermuth, Real Estate Finance Law, Sixth Edition, Practitioner Treatise, Vol. 2.
- Bryson v. Newtown Real Estate & Development Corp., 153 Conn. 267, 216 A.2d 176 (1965). See also Platte Valley Bank of North Bend v. Kracl, 185 Neb. 168, 174 N.W.2d 724, 7 U.C.C. Rep. Serv. 538 (1970).
- See Patrick E. Mears, Who’s on First? Negotiating Debt and Lien Subordination Agreements in Real Estate Transactions, Prob. & Prop., Jan. 1999, at 19.
- “[E]very portion of the real estate embraced within the mortgage was equally burdened with the debt. No part could be relieved of the burden without consent of the mortgagee.” Broughton v. Mt. Healthy Flying Service, Inc., 104 Ohio App. 479, 5 Ohio Op. 2d 224, 143 N.E.2d 597, 599 (1st Dist. Hamilton County 1957). See Schaller v. Castle Development Corp., 347 Md. 90, 698 A.2d 1106 (1997); In re Borges, 184 B.R. 874, 27 Bankr. Ct. Dec. (CRR) 701, 34 Collier Bankr. Cas. 2d (MB) 281 (Bankr. D. Conn. 1995).
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Chapter 12. Financing Real Estate Construction Part 3 35 results (showing 5 best matches)
- A seller successfully sued his lawyer for failing to draft a subordination agreement to require that all loan proceeds be used for permanent improvements on the property. Starr v. Mooslin, 14 Cal. App. 3d 988, 92 Cal. Rptr. 583 (2d Dist. 1971). See also Roskamp Manley Associates, Inc. v. Davin Development & Investment Corp., 184 Cal. App. 3d 513, 229 Cal. Rptr. 186 (2d Dist. 1986) (specifying elements of agreement that would help protect subordinating land vendor); National Mortg. Corp. v. American Title Ins. Co., 299 N.C. 369, 261 S.E.2d 844 (1980) (construction lender’s title insurer not liable for loss of priority when funds were diverted, which restored subordinating party’s original priority according to terms of agreement); Long & Foster Real Estate, Inc. v. Clay, 231 Va. 170, 343 S.E.2d 297 (1986) (real estate broker breached fiduciary duty to vendor by failing to adequately explain significance of subordination clause).
- Hyde, The Real Estate Lease as a Credit Instrument, 20 Bus. Law. 359, 389 (1965).
- Jeminson v. Montgomery Real Estate & Co., 396 Mich. 106, 240 N.W.2d 205 (1976). The facts are reported at 210 N.W.2d 10 (Mich.Ct.App.1973).
- See generally Mears, Who’s on First? Negotiating Debt and Lien Subordination Agreements in Real Estate Transactions, 13 Prob. & Prop. 19 (1999); McNamara, Subordination Agreements as Viewed by Sellers, Purchasers, Construction Lenders, and Title Companies, 12 Real Est. L.J. 347 (1984); Lambe, Enforceability of Subordination Agreements, 19 Real Prop. Prob. & Tr. J. 631 (1984); Korngold, Construction Loan Advances and the Subordinated Purchase Money Mortgagee: An Appraisal, a Suggested Approach, and the ULTA Perspective, 50 Fordham L. Rev. 157 (1964); Miller et al., Subordination Agreements in California, 13 UCLA L. Rev. 1298 (1966).
- Restatement Third, Property: Mortgages § 2.4(c) (1997). See State Bank of Albany v. Fioravanti, 51 N.Y.2d 638, 435 N.Y.S.2d 947, 417 N.E.2d 60, 30 U.C.C. Rep. Serv. 731 (1980) (advances made before the mortgagee gains knowledge of the real estate transfer will continue to be secured by the mortgage); Cook v. Springfield State Bank, 2005 WL 1186532 (Ky. Ct. App. 2005) (not reported in S.W.3d) (same).
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Chapter 6. Discharge of the Mortgage 53 results (showing 5 best matches)
- They have been attacked most often on the ground that they unreasonably restrain alienation of the real estate, but the courts have nearly always quite correctly rejected this argument. The necessity of selling the real estate with the mortgage on it may reduce the price to the seller, particularly if current financing is available at lower rates, but it certainly does not restrain alienation in a legal sense.
- . When a borrower in bankruptcy prepays a mortgage loan, the lender will not only desire to collect the prepayment fee provided in the documents, but will also wish to treat the fee as secured by the mortgage on the real estate. The argument is relevant, of course, only if the value of the real estate is greater than the balance on the mortgage debt before the additional fee is considered—in other words, the loan itself is oversecured.
- As noted above, when a person who is primarily responsible for the mortgage debt pays it off, that person ordinarily wants (and gets) the mortgage discharged. However, there is one situation in which such a person wants (and gets) an assignment of the mortgage by way of subrogation instead. It is the case in which the buyer of real estate assumes or takes subject to a first mortgage debt on the real estate, but is unaware of and does not assume an existing second mortgage or other junior lien. When the purchaser later discovers the second mortgage, she or he is entitled to pay the first mortgage debt and be subrogated to the first mortgage as against the junior lien.
- This investigation is especially important for income-producing rental real estate. The mortgagee’s investigation should include an environmental audit to determine whether the property is or may be contaminated by hazardous waste; a determination whether the property complies with the Americans with Disabilities Act, is the subject of any existing lawsuits or tort claims, and complies with local zoning and other codes; a check for unpaid trade creditors and, if they exist, a determination whether the mortgagor or mortgagee will be responsible for paying them; and a review of the content and assignability of all vendor service contracts. The mortgagee also should identify any other liabilities or restrictions on the real estate.
- 2. Possession of the real estate has been surrendered to the grantee.
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Table of Cases Part 2 26 results (showing 5 best matches)
- First Federal Sav. & Loan Ass’n of Salt Lake City v. Gump & Ayers Real Estate, Inc. ………… 402
- Fleet Real Estate Funding Corp. v. Frampton ………… 521, 523
- ING Real Estate Finance (USA) LLC v. Park Ave. Hotel Acquisition LLC ………… 17
- Inland Real Estate Corp. v. Oak Park Trust and Sav. Bank ………… 403, 429
- Jeminson v. Montgomery Real Estate & Co. ………… 410, 1148
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Table of Cases 30 results (showing 5 best matches)
- American Institute of Real Estate Appraisers of Nat. Ass’n of Realtors, United States v. ………… 997
- B.F. Saul Real Estate Inv. Trust v. McGovern ………… 1052, 1054, 1055
- Baltimore Markets v. Real Estate-Land Title & Trust Co. ………… 186
- Barbour v. Handlos Real Estate and Bldg. Corp. ………… 408
- Baypoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust ………… 535
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Chapter 7. Foreclosure 32 results (showing 5 best matches)
- Under the Restatement, either of two classes of people may pay off a mortgage debt: those who are “primarily responsible” for paying it and those who are not. Who is “primarily responsible”? The concept does not depend on personal liability for the debt. The mortgagor is primarily responsible if she still owns the real estate, whether the debt is recourse or nonrecourse. Likewise, a grantee of the fee title becomes primarily responsible, regardless of whether he assumed liability for the debt. Even a tenant, life tenant, or other limited interest holder is primarily responsible, except to the extent someone else has a duty to reimburse her for part of any payment she makes. Thus, under the Restatement, the mortgage is extinguished and the real estate redeemed if someone who is primarily responsible pays off the debt, including any valid accrued interest, prepayment fees, and other miscellaneous charges.
- Moreover, the tender must be in currency. Tender of a deed to the mortgaged real estate is insufficient even if the real estate is worth more than the outstanding debt.
- In some states that authorize power of sale foreclosures, the deed of trust is the most commonly used mortgage instrument. The mortgagor-trustor conveys the real estate to a trustee who holds it in trust for the mortgagee-beneficiary until the mortgage debt is paid in full. In the event of foreclosure, the trustee exercises the power of sale by a public sale of the mortgaged property. The sale usually is not judicially supervised.
- record interest in the real estate, Some of these states require a newspaper advertisement, but others require only public posting. Other states require published notice and notice by mail or personal service to the mortgagor and to the owner of the mortgaged real estate, but not to junior lienors and others holding an interest subordinate to the mortgage being foreclosed.
- the Mississippi Supreme Court borrowed the “commercial reasonableness” standard that governs the disposition of chattel security under Uniform Commercial Code § 9–504 and applied it to power of sale real estate foreclosures:
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Index 8 results (showing 5 best matches)
- Publication Date: October 24th, 2014
- ISBN: 9780314278326
- Subject: Real Estate Transactions
- Series: Hornbooks
- Type: Hornbook Treatises
-
Description:
This treatise provides current, expert coverage on the law of mortgages, including the mortgagor-mortgagee relationship prior to foreclosure; mortgage substitutes; transfers by the mortgagor; transfers by the mortgagee; payment and prepayment; the foreclosure process; deficiency judgments and anti-deficiency regulation; priority issues; governmental intervention in the mortgage market; and financing real estate construction.
The Sixth Edition provides a comprehensive update of relevant case law, legislation, and regulation since publication of the Fifth Edition in 2007. This update includes:- A thorough and up-to-date revision of the material on judicial and nonjudicial foreclosure
- New material on “short sales” and “loss mitigation”
- A comprehensive revision of the material on securitization and the ownership, transfer, and enforcement of securitized mortgage loans
- A comprehensive revision of materials on governmental intervention in the mortgage market, including new material on the impacts of the Dodd-Frank Act
- Discussion of recent cases and theories on the application of the “disparate impact” test in racially discriminatory mortgage lending
- A thorough and functional restructuring of the material on bankruptcy law and its impact on mortgagees in Chapters 7, 11, 12 and 13 proceedings
- Comprehensive discussion of recent judicial authority on priority issues
Like the Fifth Edition, the Sixth Edition also comprehensively tracks judicial discussion and application of the principles in the Restatement (Third) of Property: Mortgages.
