What is a Defeasible clause?
A provision of a mortgage—an interest in land given to a mortgagee-lender to secure the payment of a debt—which promises that the mortgagor-borrower will regain title to the mortgaged property when all the terms of the mortgage have been met.
What is a Defeasible clause in real estate?
A defeasance clause is a term within a mortgage contract that states the property’s title (a fancy word for “ownership”) will be transferred to the borrower (mortgagor) when they satisfy payment conditions from the lender (mortgagee).
What is an example of an alienation clause?
What is this? For example: Mary purchases a new home for $300,000 where she makes a $50,000 cash down payment and takes on a mortgage for $250,000. In her deed of mortgage, the bank will include an alienation clause to ensure that Mary is restricted from assigning the mortgage and title to her property to someone else.
When would the defeasance clause in a mortgage take effect?
Defeasance clauses are based on the concept of defeasance, which nullifies a deed or contract. Ultimately, defeasance occurs when the borrower finishes making all of the payments on the loan and no longer owes anything to the lender.
What requirement creates the fee simple Defeasible?
In order to create a fee simple subject to executory limitation, the original owner would use either durational or conditional words that establish a condition and a third party to whom the property would go to if the condition is not met or is violated.
What lien has the highest priority?
first lien
A first lien has a higher priority than other liens and gets first crack at the sale proceeds. If any sale proceeds are left after the first lien is paid in full, the excess proceeds go to the second lien—like a second-mortgage lender or judgment creditor—until that lien is paid off, and so on.
What do u mean by escalation clause?
What Is an Escalator Clause? An escalator clause, also known as an escalation clause, is a contract provision allowing for automatic increases in the agreed-upon wages or prices if certain conditions change while the contract is in effect. For example, an increase may be triggered by a higher inflation rate.
What does a Habendum clause do?
A habendum clause is section of a contract that deals with rights, interests, and other aspects of ownership given to one of the parties in land deals. In real estate leases, the habendum clause deals with the lessee’s rights and interests.
What is alienation clause in real estate?
What is an alienation clause? The alienation clause in a mortgage contract gives a mortgage lender the right to request the full and immediate repayment of the loan, including principal and interest, when the borrower sells or transfers their home.
What is fee defeasible?
Fee simple defeasible is a legal term and type of property ownership, where the ownership is dependent on specific conditions. If the conditions of ownership are violated, the property may be returned to the grantor or to a specified third party.
What are the three types of defeasible fee simple estates?
Three types of defeasible estates are the fee simple determinable, the fee simple subject to an executory limitation or interest, and the fee simple subject to a condition subsequent.
Who is most benefited by an acceleration clause in a mortgage?
the lender
An acceleration clause allows the lender to require payment before the standard terms of the loan expire. Acceleration clauses are typically contingent on on-time payments. Acceleration clauses are most common in mortgage loans and help to mitigate the risk of default for the lender.
What is an acceleration clause in a loan?
Definition. An accelerated clause is a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions.
What is hoi in mortgage?
The NAHB/Wells Fargo Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria.
Do sellers like escalation clauses?
An escalation clause is only triggered if there are competing offers, so you should not include an escalation clause in your purchase offer unless you and your real estate agent are confident that there will be multiple offers. The seller is not accepting escalation clauses.
What is price escalator clause?
An escalation clause is a clause in a contract that guarantees a change in the contract price once a particular factor beyond the control of either party results in an increase or decrease in the Contractor’s costs.
What is novation in real estate?
Novation is when an existing contract or legal obligation is replaced with a new one of equal or proximate value. Novation makes it possible to transfer all of the benefits and burdens on an original party in a contract to a new party who was not included in the original agreement.
What is an example of a fee simple defeasible?
A special limitation is one type of fee simple defeasible. With this condition, the original land owner does not have sue to take back the property if the deed condition is violated. An example of this is land sold with the special limitation that it is only to be used for agriculture.
What is an example of a defeasance clause?
For example, the borrower sets aside cash to pay off the bonds; therefore, the outstanding debt and cash offset each other on the balance sheet and do not need to be recorded.” A defeasance clause in a mortgage deed states that the lender will give the borrower ownership of the property once all mortgage payments are made.
What is a defease clause in a mortgage?
The defease clause in a mortgage requires the mortgagee to execute a deed of defeasance fee to the property in exchange for getting funding from the bank to purchase the property.
Can a defeasance clause be used to transfer alternative collateral?
Defeasance Clause Considerations. In some situations defeasance clauses may also be used for transferring alternative collateral. Specifically a borrower could include a defeasance clause if they plan to accumulate alternative assets that they would like to replace for the real estate collateral at some point during the loan.
Can parties to a contract handle legal defeasance provisions?
These examples show parties to a contract may handle legal defeasance provisions. DEFEASANCE.