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MORTGAGE LAW

OVERVIEW OF MORTGAGE LAW


Mortgage Law is an emerging area of law which has already been acknowledged by the Bar Associations of six states (FL, SC, GA, NC, TN and AL.) Mortgage Law is a sub practice of the Real Estate Law profession in which knowledgeable attorneys use their expertise to guide and protect clients through the mortgage process. Consumers benefit from the counsel of a Mortgage Attorney in many ways.

UNDERSTANDING

Disclosure is not the same as understanding. When applying for a mortgage loan, the government requires the lender provide a number of legal documents to ensure the borrowers understand the different options and costs. The large number of documents contain terms like APRs and Yield Spread Premiums and make the process all but impossible to understand, benefiting the loan officer. A Mortgage Attorney will explain these terms in order to educate the Consumer throughout the mortgage process.

REPRESENTATION

Mortgage Attorney legally represents the borrower and is required to put their client’s interests first. Clients gain protection, peace of mind and counsel they can trust.

COMMISSION FREE ADVICE

Borrowers traditionally look to the loan officer to guide them through the mortgage transaction. However, most Consumers are unaware of the variety of loan programs and that different loan programs pay varying amounts of commission to the loan officer. Many times the advice Borrowers receive is based upon the commission paid to the loan officer.
A Mortgage Attorney cannot receive any monies, including commissions, from the lender. Advice is based solely upon the client’s best interests.

MORTGAGE LAW A MORE DETAILED SUMMARY
A mortgage involves the transfer of an interest in land as security for a loan or other obligation. It is the most common method of financing real estate transactions. The mortgagor is the party transferring the interest in land. The mortgagee, usually a financial institution, is the provider of the loan or other interest given in exchange for the security interest. Normally, a mortgage is paid in installments that include both interest and a payment on the principle amount that was borrowed. Failure to make payments results in the foreclosure of the mortgage. Foreclosure allows the mortgagee to declare that the entire mortgage debt is due and must be paid immediately. This is accomplished through an acceleration clause in the mortgage. Failure to pay the mortgage debt once foreclosure of the land occurs leads to seizure of the security interest and its sale to pay for any remaining mortgage debt. The foreclosure process depends on state law and the terms of the mortgage. The most common processes are court proceedings (judicial foreclosure) or grants of power to the mortgagee to sell the property (power of sale foreclosure). Many states regulate acceleration clauses and allow late payments to avoid foreclosure. Some states use instruments called deeds of trust instead of traditional mortgages.
Three theories exist regarding who has legal title to a mortgaged property. Under the title theory; title to the security interest rests with the mortgagee. Most states, however, follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. Finally, the intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.

The mortgagor and the mortgagee generally have the right to transfer their interest in the mortgage. Some states hold that even when the purchaser of a property subject to a mortgage does not explicitly take over the mortgage the transfer is assumed. Mortgages employ due-on-sale and due-on-encumbrance clauses to prevent the transfer of mortgages. These clauses allow acceleration (having the principal and interest become due immediately) of the mortgage. In 1982, Congress made these clauses enforceable nationwide by passage of the Garn-St Germain Depository Institutions Act of 1982. The law of contracts and property govern the transfer of the mortgage's interest.

If the mortgage being foreclosed is not the only lien on the property then state law determines the priority of the property interests. For example, Article 9 of the Uniform Commercial Code governs conflicts between mortgages on real property and liens on fixtures (personal property attached to a piece of real estate).

When a mortgage is a negotiable instrument it is governed by Article 3 of the Uniform Commercial Code. See Negotiable Instruments. A mortgage may be used as a security interest by the mortgagee.

The law of mortgages is mainly governed by state statutory and common law. Mortgages are regulated by federal or state law or agencies depending on under whose law they were chartered or established. The Office of Thrift Supervision, an office in the Department of the Treasury, regulates federally chartered savings associations. The Comptroller of the Currency charters and regulates national banks. Federal credit unions are chartered and regulated by the National Credit Union Administration.

Federal agencies that purchase loans and mortgages are the Federal National Mortgage Association or Fannie Mae, the Federal Home Loan Mortgage Corporation or Freddie Mac, and the Government National Mortgage Association or Ginnie Mae. The federal government also insures mortgages through the Federal Housing Administration and the Department of Veterans Affairs.


Partially taken fromhttp://topics.law.cornell.edu/wex/mortgage 
(for more details or for related links).