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CHAPTER 43
REAL ESTATE MORTGAGES
Answers to Learning Objectives
1. A mortgage is an interest in real property given to secure payment of a debt. The mortgagor retains
possession of the mortgaged property, but upon default, the mortgagee may take possession and sell
at foreclosure.
Lesson Outline
1. A mortgage is a lien given upon real estate to secure a debt.
2. The mortgage contract sets forth the rights and duties of the contracting parties.
3. A mortgage should be recorded immediately in order to protect the priority of the mortgagee.
4. The duties of the mortgagor include:
more.
6. If the mortgagor fails to pay the debt secured by the mortgage when it becomes due, or fails to
perform any of the other terms set forth in the mortgage, the mortgagee has the right to foreclose for
the purpose of collecting the debt.
7. The mortgagee may assign the rights under the mortgage agreement.
8. A deed of trust is often used as a substitute for the ordinary form of mortgage for the purpose of
securing a debt.
Comments on Cases
(p. 518) A mortgage must be in writing and in the same form as a deed in order to be effective.
OneWest Bank, FSB v. Dorner, 953 N.E.2d 892 (Ohio Com. Pl.)
Chapter 43 Real Estate Mortgages
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(p. 518) The court did agreed that the fact that the mortgage made it into the public record system was
enough to give subsequent purchasers or creditors actual notice even though the entire fee had
not been paid. However, the court was adamant that the bank could not have the benefits of the
recording system without paying the costs. In re Coffelt, 395 B.R. 133 (Bankr. D.Kan.)
Answers to Questions
(Page 524)
1. A mortgage is not a debt itself, but rather an interest in real estate given to secure the payment of a
debt.
2. The formalities necessary for a mortgage are a writing, acknowledgment, and setting forth the
rights and duties of the contracting parties.
3. Normally a mortgagor executes a mortgage to raise money for the purchase price of real estate, but
one may borrow money for any reason and secure the loan by a mortgage.
4. The duties a mortgagor assumes are payment of interest, principal, taxes, assessments, and doing
nothing to impair the security of the mortgagee.
8. When a purchaser of property agrees to “assume a mortgage”, she agrees to be primarily liable for
its payment. A mortgagor will also remain liable for payment unless the mortgagee agrees to a
novation.
9. A mechanics lien is a lien held by people who have furnished materials for or workers who have
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Answers to Case Problems
(Page 525)
1. If the state does not have a law regarding the sufficiency of the sale price at a foreclosure, the bank
has a right to the deficiency judgment of $99,000 because that constitutes the difference between
the amount owed and the price received at sale. If the state has such a law, the bank has a right to a
judgment in the amount of the difference between the debt and the fair market value of the property
at the time of the sale. In this case, the court found the bidding of multiple parties at the foreclosure
sale established a fair market value of $401,000. In re Denaro, 383 B.R. 879 (N.J.)
4. Yes. The court stated that the issue of when a mortgage assignment was recorded is relevant only to
the extent of establishing creditor priority and subsequent notice to a bona fide purchaser of the
land. The validity of the mortgage itself remains unaffected by the timing of the assignment’s
recordation. Wead v. Lutz, 831 N.E.2d 482 (Ohio Ct. App.)
5. Yes. The court held that absent any evidence of possession or control, a mortgagee bank has no
ability to create or prevent a nuisance. Kramer v. Angel’s Path, L.L.C., 882 N.E.2d 46 (Ohio)
6. No. The Melsons had notice of the deed of trust because it had been recorded several years before