Two instruments Mortgage Terms
Two instruments:
- The mortgage is the security instrument. This creates a lien on the property and serves as the debt security.
- A note or bond is also signed by the original owner to evidence a promise to pay the debt.
The borrower is called the mortgagor.
The lender is called the mortgagee.
Deed of Trust Terms:
The borrower is called the trustor.
The lender is called the beneficiary.
Here there is an intermediary called the trustee. The trustee holds property title for the beneficiary. This serves as security for the repayment of the debt.
Judicial Foreclosure:
Judicial foreclosures are conducted under sanction of a court. These are often more time-consuming because the court must approve the final bid to guard against large deficiency judgments. Lis pendens (Latin for notice of pending action) is normally filed with the local county clerk. This serves as public notice that the mortgagee has brought an action of foreclosure on the mortgagor. No further liens may be brought or included after lis pendens is filed. If you research a property for investment purposes, make sure that all parties, owner, renters, lease holders, creditors, and so on, have been properly served notice of the foreclosure. The current tenant’s lease may survive the foreclosure process if not served properly and on time.
A court-appointed referee advertises the sale in the local newspapers. This is normally under the section called, legal notices. At auction, the referee will announce the terms of sale, then start the bidding process at an upset price or opening bid amount, that has also been set by the court. The upset price includes the mortgage balance, interest and back taxes, court costs, legal fees, and liens and judgments on the property before the foreclosure process began (lis pendens). Successful bidder at auction gets a Certificate of Sale. Some properties will have a Statutory Right of Redemption period that goes beyond the foreclosure auction, and has the possibility to kill the deal. If not, then the successful bidder gets the deed, sometimes called the sheriff’s deed.