University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

189

Pages:

2
Author:

bratrochanter

The text explores the securitization of mortgages, judicial scrutiny in foreclosure cases, various real estate security instruments, and the process and rights involved in foreclosure and liens. Securitization and Mortgage Foreclosures 1. Securitization Process: o Securitization involves bundling loans, often mortgages, into securities sold to investors, who receive a portion of borrower payments. Roles in this process are divided among different parties:  Issuer: Bundles loans into securities and sells them to investors.  Trustee: Protects investor interests.  Servicer: Collects payments from borrowers, addresses delinquencies, and distributes funds. o This complex structure led to increased foreclosure filings as defaults rose, highlighting issues with incomplete or unclear ownership documentation in mortgage assignments. 2. Judicial Scrutiny in Foreclosures: o In the 2007 case In re Foreclosure Cases, Judge Boyko emphasized that lenders must prove ownership of the note and mortgage before foreclosure. The court dismissed cases where the plaintiffs failed to demonstrate they were legal holders at the time of filing, underscoring the necessity of jurisdictional integrity and proper documentation. Real Estate Security Instruments and Foreclosure Rights 1. Mortgages: o A mortgage is a security interest in real property, requiring formal creation and recording to protect the mortgagee’s rights. If the borrower defaults, the mortgagee can foreclose, which may be conducted by strict foreclosure, sale, or power of sale, depending on state laws. o Right of Redemption allows borrowers to reclaim their property by repaying the debt before foreclosure is finalized. 2. Deed of Trust: o In states using deeds of trust, three parties are involved: the property owner (debtor), the trustee (holding title as fiduciary), and the lender (beneficiary). The trustee can sell the property on behalf of the lender if the borrower defaults, though most states treat these arrangements similarly to mortgages in foreclosure. 3. Land Contracts: o A land contract allows the seller to retain legal title while the buyer makes installment payments. If the buyer defaults, the seller may declare forfeiture and reclaim the property, though some states require a foreclosure process to avoid inequity. Mechanic’s and Materialman’s Liens 1. Lien Rights: o Mechanic’s and materialman’s liens enable contractors and suppliers to claim a lien on property they improved until paid. States vary on eligibility and procedural requirements. 2. Subcontractor and Materialman Rights: o Different systems (New York vs. Pennsylvania) govern subcontractor rights; some states require specific written contracts to establish lien rights. This text underscores the balance courts and lawmakers seek between enforcing rights (like foreclosure and liens) and maintaining fairness and clarity in property rights documentation and enforcement.