Chapter 13: Mortgage Fundamentals

Mortgagor - borrower.

Mortgagee - lender. 

Equity of Redemption - the right of the mortgagor to reclaim clear title to the property upon full repayment of the debt.

Types of Mortgages: 

1. Legal Mortgage - a doc in which the direct conveyance of title is involved subject to the repayment of a debt.
2. Equitable Mortgage - the most common form, mortgage of equity of redemption. 
3. Chattel Mortgage - given on moveable possessions or personal property.

Mortgage Priority - determined by the time of registration under the Registry Act and Land Titles Act.

Subsequent Encumbrances: Right to prevent default / Right to be notified.

Implied Covenants - obligations of a mortgagor:

1. First Implied Covenant - usual covenants.
2. Second Implied Covenant
3. Third Implied Covenant

Mortgagee Rights: 

1. Right to assign the mortgage - the mortgage can be sold, transferred or assigned without the consent of the mortgagor. The mortgagor must be notified of the assignment. 
2. Right to be paid - based on arrangements in the mortgage document. Failure will give rise to the power of sale and foreclosure. If all covenants are fulfilled - a discharge is provided. 

Mortgagor Rights: 

1. Right to quiet possession 
2. Right to redeem the property free of the mortgage - the right to sell or mortgage his interest.
3. Right to discharge the mortgage - when the loan is paid off. Discharge fee.

Privileges:

• Prepayment 
• Renewal 
• Transfer 
• Postponement 

Default - failure to fulfill covenants, to make payments. 

Non-Legal Remedies - attempt is made through personal contact with a mortgagor. 

Legal Remedies - legal action. Court, power of sale, possession etc. 

Mortgage Funding 

Money Market - sector of financial market dealing with short-term investments.

Primary Market - consists of prime and sub-prime markets. Prime market is focused on borrowers who have A or A+ credit. Sub-prime - higher risk lenders, B and C levels. 

Secondary Market - Trading of existing mortgages. Mortgages are pooled and converted into securities. 

Canada Mortgage and Housing Corp. (CMHC) - has provide default insurance. Major supplier of mortgage insurance.