The Rights and Duties of Mortgagees and Mortgagors - Term Paper Example

The rights and duties of mortgagees and mortgagors Business operations follow due process in which all parties involvedin the transaction bear different legal responsibilities and rights. In the case of loans, the company law provides that the loanee must offer a property of value that commensurate with the loan as a collateral security1. A mortgage is a legal agreement between a property owner and the lender that provides for the conditional rights of ownership of the property in question. This paper critically discusses the differential legal rights and obligations between mortgagors and mortgagees. The conditions of the mortgage are usually withdrawn once the mortgagor settles the loan in full2. A mortgagee is a financial organization or entity that lends money secured by a mortgage. Mortgage prevents the mortgagor form transferring the mortgaged property before settling the payments in full. This implicitly denies inhibits the mortgager form exercising the full control of personal mortgaged assets. In essence, while the mortgagor maintains possession of the mortgaged property, absolute control is legally by the mortgagee. Since every businessperson is inclined to ensure sound economic stability, the mortgaged property Mortgages are legally binding, and this gives the lender an assurance of financial security. The mortgagor is the borrower under a mortgage. In order to redeem the mortgage, the mortgagee is legally indebted to meet the financial obligations fully as stipulated in the contract. In case the mortgagor fails to satisfy the agreement, the mortgagee has a legal ground to foreclose sale in order to recover the loan2. Mortgaging imposes a financial burden on the mortgagor in case he or she effectively serves the accrued interests but fail to make the full payment in time. In the event that the mortgagor pays the interest of the mortgaged property but fails to complete the payment, the mortgagee has the discretion to resell the mortgaged property without reimbursing the interests already remitted by the mortgagor. This stance of lost interest payments places the mortgagor at a financial disadvantage. The right of possession of any property through a mortgage remains under the mortgagor unless expressly prohibited by the lease agreement. If the agreement denies the mortgagor the legal ownership of the mortgaged property, the mortgagee has the discretion to repossess the contested property. For instance, in the case of Knightsbridge Estates versus Byrne in 1939 chapter 144, a company created a mortgage of freehold property and accepted that the payments be paid in eighty six monthly installments. Agreement implies that redemption of the mortgaged property was prohibited by the agreement for a period of forty years. Re-acquisition of a disputed property under a mortgage follows the due process of law. Commonly, the court systems do not universally implement the rights of the mortgagor to repossess a mortgaged property from the mortgagor. For instance, the right is restricted when the contested property is a residential house. In the case where the debtor (mortgagor) defaults in meeting the financial obligations within the agreed time, the mortgagee is entitled to appointing a receiver to manage the property. The mortgagee is also eligible to seek a foreclosure order if the property is a business premises. The legal strength of a mortgage is based on consensually agreed timeline. In cases where mortgagors default on their loans and lose their mortgaged property, they may recover the property through the right of redemption.This right obliges the mortgagors first to pay their lenders the full dues for their debts and any additional related charges such as accrued interests. For instance in the case law between Mentecki and Saxon Mortgage, Inc., 1997 WL 45088, the court concluded that as stated by the plaintiff, the payment of a yield spread premium is a referral prohibited by 12 U.S.C. ß2607 and would only be upheld if the law directed otherwise. Furthermore, the right of rescission allows the borrowers the ability in some circumstances to cancel their loan agreements within the first three days without facing undue legal repercussions3. The right to rescind ensures that borrowers provide accurate disclosures at the time of signing a mortgage. Additionally, the rescission rights protect the borrower from endangering the family by using a house as a collateral security. However, the application of precision is only limited to the cases where the house is intended to be used as collateral. In essence, it does not apply where the mortgage is intended to buy the house itself. All mortgagors have the right to redeem their mortgages and save their homes from foreclosure through settling the entire mortgage dues and the accrued interests. However, this may impose a financial burden on the homeowner to obtain and make the lump sum payments all at once. On the other hand, the mortgagor has the legal support to redeem their mortgages later after a foreclosure sale4.This later redemption of mortgages is implemented by redeeming the property for the foreclosure sale price i.e., selling the home to a buyer for the fair market value and keeping the excess cash as benefits from the sale. Section 72 of the Transfer of Property Act provides that the mortgagee may spend the required amount in the preservation of the mortgaged property from all feasible perils and supporting the mortgagors title to the mortgaged property. In the absence of a contradicting contract, the mortgagee has the discretion to add all the money spent in securing the rights of the mortgagor in a property to the principal.In the cases where the mortgaged property is insurable, the mortgagee may insure the property against all manner of feasible risks and the premiums resulting from such insurance is added to the mortgage principal. Section 67 of the Transfer of Property Act stipulates that in the absence of a contradictory contract, a mortgagee has the right to obtain a court injunction to prevent the mortgagor from redeeming the property. A lawsuit preventing a mortgagor from redeeming the mortgaged property is called a suit for foreclosure. Critical rights of the mortgagor The right of redemption confers on the mortgagor the legal ability to redeem the mortgaged property either on payment or tender of the mortgage money after the maturity of the mortgage payment period ends. These rights include; i. The right to return to the mortgagee all the documents that relate to the property such as the mortgage deed ii. Obtaining delivery possession of the mortgaged property from the lender in case he or she has it iii. Re-transfer of the same property to himself or his nominee A mortgagor having a share in the mortgaged property is not entitled to redeem his or her share.Renewalof sharesis only possible if he or she pays a proportionate amount or the mortgage has acquired in part or whole, the share of other co-mortgagor. If the due date of the mortgage payment expires, the borrower is eligible for a reasonable notice before the payment is effected as provided in the mortgage deed. In summary, the right of redemption is effected when it has not been restricted by acts of parties or by as decree of the Court5. Any form of restrictions can not fetter equity redemption. In principle, “once a mortgage, always a mortgage.” Therefore, converting a mortgage into a sale on default payment is wrong. However, there is no legal barrier preventing the purchase of the mortgage. The mortgagor is entitled to get inspection and copies of all relevant documents relating to the mortgaged property within the possession of the mortgagee provided that the right of redemption prevail. Furthermore, a mortgagor who has affected two or more mortgages on the same or different properties is entitled to redemption of any one of the properties without being compelled to redeem them all at once unless provided by the contract. In essence, consolidation of mortgages by the mortgagor is prohibited by the law unless the contract provides otherwise. For example, in the case of Maxwell and Fairbanks Capitol (Case No. 00-14283-JNF; Adv.P No. 00-1568, July 16, 2002) the appellate judge ruled that Ms. Maxell remain in her home. The mortgage was discharged, and she received an additional $50,000 from Fairbanks due to her being a victim of predatory lending from Fairbanks Capitol. Rights of the mortgagee The mortgagee has legal rights to explore once the mortgage debt has become due. For instance, the mortgagee can file a foreclosure lawsuit intended to bar the mortgagor from redeeming the mortgaged property. The court in effect issues an injunction or a decree in the spirit of the terms of the mortgaging contract. However, the foreclosure is limited to sale and is viable for a period of 12 months from the time of mortgage debt maturity. Furthermore, the unsufrucuary mortgage cannot sue for sale or foreclosure. A mortgagor can only sue the mortgagee for foreclosure since the property sold is already by the mortgagee. On the other hand, several mortgagors cannot sue for a foreclosure sale on the basis of a fractional share of the mortgage security. The separate lawsuits for disclosure sales are only valid if the mortgagees have damaged their interests under the mortgage with the acknowledgement of the mortgagor. In essence, filing a foreclosure for sales is legally made as a single suit even if the interests are separate. A mortgagee has the legal support to sue the mortgagor for the mortgage money. For example, in the case file Dixon v Express Equity, (Case No.4D12-1381(4thDCA6/5/13), the lender did not have the rights ti a foreclose. Even though there was testimony that the lender was the owner and holder, this stance was negated by the the particular endorsement. Express Equity endorsed note to pledge security interest (not ownership) to "US Century" but the appellate court found only US Century has standing to bring suit. The mortgagee is entitled to appoint a receiver of the income of the mortgaged property under section 69A of the Property Transfer Act. If an individual is named in the mortgage deed, he or she can be appointed as a mortgage receiver. In the absence of such a fore-mention, the mortgagee may appoint a receiver as agreed consensually by the mortgagor. If the consensus fails, the mortgagee must make an application to the court to make a suitable appointment that is acceptable to both the mortgagor and the mortgagee. The appointed receiver is regarded as the agent of the mortgagor6. The receiver is entitled to recover the income of the mortgaged property, to give valid receipts and file suits for making the recoveries. From the recovered payments, the receiver is responsible for discharging all rates, taxes, and accruals. However, from the law case between National Bank v. Kesler, 2009 Kan. LEXIS 834, it can be determined that a nominee company has no right or standing to bring an action for foreclosure. The mortgagee has the legal rights to any accession to the mortgaged property while the mortgage continues. For instance, the mortgagor is entitled to the benefits resulting from the mortgagee. Extra funds allocated by the mortgagee are added to the principal sum due under the mortgage. The additional expenses include the interest at the mortgage rate. Case law (Stark versus EMC Mortgage Corporation) Anticipating a business success, the Starks borrowed 56,900 USD using their home as a collateral security for the loan with a mortgage. Despite the investement in the business, it failed and in April 2000 the Starks petitioned for bankruptcy protection7. Anticipating a foreclosure, the Stark’s vacated their home and settled in a different apartment. However, they remained in possession of the legal title of and did not abandon the home. The court determined that EMC agent forcibly entered Stark’s home and posted a sign in the front window indicating that the house had been secured and winterized. Not for sale or rent, EMC’s agent, without the Starks’ consent. After the incident, the Starks amended their complaint and included the claims of intentional torts against the lender, The complaint also sought compensation for punitive damages. After an explicit briefing, the arbitrator ruled that the limitation to the start was ambiguou 8. The arbitrator decided that the agreement purport to grant him exclusive powers but then denied him the jurisdiction to grant punitive damages to the borrower and lender who bore the right to claim as permissible by the law. The arbitrator concluded, in at least three places the Stark’s could seek all damages allowed by law, and then that promise could be taken away9. The rullling was a keystone of an ambiguous contract, and the Agreement was interpreted in the favor of Stark’s. The law directed that Starks not be prohibited from seeking punitive damages from the lender (EMC). The arbitrator found that EMC violated the Fair Debt Collection Practices Act. Case law 2: Glover versus Standard Federal Bank Lonnie and Dawn Glover borrowed an adjustable rate mortgage for the purchase of their home and later on refinanced it to obtain a fixed-rate mortgage. Heartland brokered the first adjustable loan transaction and Standard Federal funded and acquired the initial mortgage. As part of refinancing the first mortgage, Heartland brokered a mortgage for the Glovers with an "above by Standard Federal.” The payment of the premium for the new loan focused on the current dispute. In a settlement of the case between Glover and Standard Bank, the district court held that the Glovers met their burden under Rule 23. Fthemore,the court defined the potential class as all people obtaining a mortgage brokered by Heartland and financed by Standard Federal under circumstances that gave rise to any of the types of incentive payments described in the complaint. Case notes 3 Glen Crowther purchased secured by a promissory note and a deed of trust. In this case, BNC Mortgage Inc. was the mortgagee and payee of the promissory note. Millsap Singer and Dunn P.C was the trustee in the deed of trust.The deed did not name BNC as the beneficiary but instead named Mortgage Electronic Registration System (MERS), solely as BNC’s nominee. Bellistri secured a collector’s deed from the collector of revenue of Jefferson County, Missouri. However, after the issuance of the deed, MERS, as nominee for BNC, assigned the deed of trust to Ocwen on April 4, 2007. The assignment of the deed of trust transferred all notes described in the deed of trust to Ocwen. Bellistri filed the instant action seeking to evade the title and remove Crowther from the property. Initially, Bellistri named Crowther as a defendant and published notice for all anonymous people with vetsed interets in the property. Later, Bellistri filed a motion to add Ocwen as a necessary if not indispensable party. The circuit court granted Bellistri’s motion. Ocwen and Bellistri filed cross-motions for summary judgment. The circuit court denied Ocwen’s motion and granted summary judgment in favor of Bellistri. In conclusion, the mortgagor and mortgagee have different rights and obligations according to the law. A moergaging contract imposes a payment liability on the mortagor while at the same time confering of the mortgagee the assurance of fiancial security even if the payment for the property secured by a mortagage is not fully settled. mortaged property act as collateral security for the asssets acquired by the mortgagor. The mortgagor has the rights to file a foreclosure, and to sell the mortgaged property without a court intervention after the lease period becomes due. On the other hand, the mortgagor has the rights to redeem the mortgaged property either on payment or tender of the mortgage money after the maturity of the mortgage payment period ends, a reasonable notice before the payment is effected. This provision is often available in the mortgage deed and to get inspection and copies of all relevant documents relating to the mortgaged property within the possession of the mortgagee provided that the right of redemption prevail. These differential rights and obligations are conceivably imbalanced hence making mortgaging a very complicated business initiative. References Anders G. Merchants of debt KKR and the Mortgaging of American business. (Washington, DC, Beard Books 2002). Bar, C & Drobnig, U. The interaction of contract law and tort and property Law in Europe: a comparative study. (München, Sellier European Law Publ. 2004). Boiron P. & Boiron C. Commercial real estate investing in Canada the complete reference for real estate professionals. (Mississauga, Ont, J. Wiley & Sons Canada 2008). Chowdhury O, Obaidul Huq Chowdhurys Transfer of Property Act (Act IV of 1882). (Dhaka, Dhaka Law Reports 1990). Ghent C. and Kudlyak M . 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