Fundamentals of Mortgage Law

Because of this, it does not run with the land, so that the lender can sue the borrower on his personal covenant even in the eventuality that the borrower has sold the interest in land to someone else who has assumed the mortgage. In practicality, this means that until the original mortgage contract is valid, in full force and effect the original mortgagor is always liable.[ ] Title IntegrityThe mortgagor confirms and guarantees that he is the owner in fee simple and holds all rights and powers that such ownership entails, including the right to convey the land to the mortgagee.[ ] Free and ClearThis is the very essence of the security for the debt: the title must be free and clear of all encumbrances (subject to certain statutory rights, such as taxation), so that conveyance can take place. Upon conveyance, the interest is transferred to the lender while the borrower retains possession. But on default, the borrower will deliver also possession to the lender subject to any encumbrance in priority. This can be a tax lien or, in the case of default on a second mortgage, a first mortgage.[ ] Further AssurancesIn the event of default, the mortgagor promises to do all that is necessary to allow the lender to obtain title of the property.[ ] Prior EncumbrancesExcept for statutory encumbrances, the mortgagor must make a declaration of any and all charges that have priority over the mortgage being contracted, otherwise the lender expects and has the right to be registered in first priority.[ ] InsuranceThe mortgage covenants to either keep the buildings located on said land insured at all times or, in the alternative, to provide a cash bond covering the replacement cost of said buildings.[ ] Release of all ClaimsThe borrower gives up any claims he may have against the lender with respect to the property, except the borrower's right to demand reconveyance when the underlying debt is repaid.[ ] Acceleration on DefaultAcceleration is a proviso stipulating the on default the principal and interest of the underlying debt will both become due and payable forthwith at the option of the mortgagee.

[ ] Quiet PossessionA stipulation that, until default, the mortgagor shall have quiet possession of said lands.[ ] Omnibus ClauseIn default of any payment of money to be paid by the mortgagor under the terms of the mortgage contract, the mortgagee may pay the same and the amount so paid shall be added forthwith to the principal debt secured by the contract and carrying interest at the same rate stipulated by the contract.[ ] RepairsThe mortgagor has a duty and an obligation to keep the lands and the buildings thereon in good conditions and in a reasonable state of repair and, Buy Mortgage refinance leads furthermore, he will not abandon or commit waste anywhere on the mortgaged property. This clause is intended to safeguard the value of the lender's security.[ ] AdvancesThe mortgagee shall not be bound to advance any part of the money intended to be secured by the mortgage contract. For example, where part of the money has been advanced and subsequently a builder's lien is filed against the land, the lender will require the lien to be removed before advancing further funds. Note that builder's liens have priority over mortgages.[ ] Sale ClauseAlso known as 'Due on Sale' the mortgagor agrees to pay, at the option of the mortgagee, all principal and interest of the underlying debt upon sale of the property.