D: Mortgages & Security Devices

MORTGAGE

1. Requirements

2. Instruments that make up a mortgage

1. (i) identifies the parties
   (ii) identifies the property
   (iii) Statute of Frauds

2. (i) mortgage
   (ii) note
   (iii) creditor’s remedies

LIEN THEORY

• Mortgagor (1) possesses the property AND (2) has rights to rents and profits.

• Mortgagee has a lien on the property.

TITLE THEORY

• Mortgagor possesses the property (until default).

• Mortgagee has rights to rents and profits.

INTERMEDIATE THEORY

Lien theory applies UNLESS default, upon which title theory applies.

When a mortgagor transfers the mortgage, and the transferee ASSUMES THE MORTGAGE, what is the transferee’s liability?

The transferee can be personally liable (primary) along with the mortgagor (secondary).

When a mortgagor transfers the mortgage, and the transferee TAKES SUBJECT TO THE MORTGAGE, what is the transferee’s liability?

The transferee is not personally liable, but their interest can still be foreclosed upon.