A mortgage is a type of secured loan in which real property is used as collateral.
The legal effect of a mortgage depends on the state.
This does not sever a joint tenancy.
If there are multiple liens on property, generally liens are given priority based on who was first-in-time to file the lien on the deed.
- However, the purchase money mortgage has priority has a priority over other liens.
A deed of trust is when a third-party trustee holds title to the property and sells it in the event of a default to repay the creditors.
About half the states recognize the deed of trust.
An installment land is when a buyer agrees to pay the purchase price in installments over a period of years. The buyer typically receives possession of the property during the contract period, but the seller retains title to the land during this time and transfers it at the end thereof.
Installment land contracts usually contain a clause stating the seller has the right to terminate the contract in the event of a default, regaining possession without legal process and retaining all previous payments.
In the event of a default, there are three options:
- Strict Foreclosure
- Judicial Foreclosure
- Judicial foreclosure is when one uses the judicial process to take possession of the property and sell it in a public sale.
- Available in every state
- Non-Judicial Foreclosure
In either type of foreclosure sale, the mortgagor has the right to redeem the mortgage by paying the entire balance of the debt. Some states provide a statutory right of redemption, allowing the mortgagor to redeem the property even after the foreclosure sale.
Contracts can and some state statutes do allow for a right of reinstatement, allowing a mortgagor to cure his default by paying all past-due amount.
Judicial foreclosure is where a full judicial proceeding is used to take possession of and effect a public sale of the foreclosed property.
These non-judicial foreclosures, also known as foreclosures by power of sale, allow the mortgagee to conduct a public sale of the property on his own, but still require notice to be given to the interested parties.