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25. Does the builder now own fee simple title to the house?
A year later, the buyer missed several mortgage payments to the builder and became unable to make payments. During that year, property values in the neighborhood declined substantially. The builder suggested that the buyer deed the house back to the builder to settle all claims and avoid the costs and other disadvantages of foreclosure. The buyer deeded the house back to the builder.
A builder sold a new house to a buyer for use as the buyer's residence. The buyer paid 10% of the purchase price and financed the rest by executing a promissory note and purchase money mortgage to the builder.
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A purchase-money mortgage is unlike a traditional mortgage. Rather than obtaining a mortgage through a bank, the buyer provides the seller with a down payment and gives a financing instrument as evidence of the loan.
A deed in lieu of foreclosure is a potential option taken by a mortgagor, usually as a means to avoid foreclosure. In this process, the mortgagor deeds the collateral property, which is typically the home, back to the lender that is serving as the mortgagee in exchange for the release of all obligations under the mortgage. Both sides must enter into the agreement voluntarily and in good faith.
D is correct. A purchaser may tender a deed in lieu of foreclosure to the mortgagee, but both the mortgagor and mortgagee must agree to this in good faith. Acceptance of the deed in lieu of foreclosure permits the mortgagee to take immediate possession without the formalities of a foreclosure sale. In this case, the builder may accept the deed in lieu of foreclosure, and thereby become the owner in fee simple.
A is incorrect. A purchaser who needs to raise money may sell her land to another and then lease the land back for a longer period of time until the money can be raised. Courts will often treat these agreements as disguised mortgages. However, in this case, there is not a disguised mortgage because there are no regular payments being made and no option to repurchase by the buyer.
B is incorrect. This is an incorrect statement of law. After a mortgagor has defaulted on a mortgage, the mortgagee in good faith must consider a request made by the mortgagor for a modification of the mortgage or other alternatives to foreclosure.
C is incorrect. Under the doctrine of equity of redemption, a mortgagor has the right to redeem the land by paying off the remaining amount of the mortgage before the sale of the land. In this case, the buyer is essentially turning over any equity of redemption to the builder and offering a deed in lieu of foreclosure instead.