Sec. 100. If the application is granted, the borrower is required to execute a note and mortgage in form required by the lender, and to furnish, at expense of borrower, a certificate or abstract of title, and a transfer of the policy of insurance, if the premises are insured, and have a "mortgage clause" attached.
Sec. 101. The mortgage, the note, the certificate of title or abstract, and the policy of insurance, if the premises are improved, remain with the lender while the loan is in force.
Sec. 102. Two short-cut rules for computing interest:
(1.) Reduce the time to days. Multiply the principal by the number of days, and for 5 per cent divide by 72; for 6 per cent, by 60; for 7 per cent by 52; for 8 per cent by 45, and for
9 per cent by 60. Example: What is the interest on $5,000 for
65 days at 6 per cent. Solution: 5000 times 65 equals 325,000; 325,000 divided by 60 equals $54.17.
(2.) Reduce the time to days. Place the amount, the rate and the time in days above the line, and the figures 3, 3, 4 below, thus: $5000 65 6%
Eliminate factors by cancellation. Then multiply together the figures above the line and divide by the product of the figures below the line.
In either of above rules, if principal is in even dollars, point off three decimal places; if in dollars and cents, point off five decimal places; the result will be the amount of the interest in dollars, or in dollars and cents, as the case may be.
One of the above methods may be used to verify the other, or to verify interest figured by any other method.
Sec. 103. The maker of a note may reserve the right to pay it off at any time before maturity by paying a bonus of interest. This may be stated in the note as follows: "I hereby reserve the right to pay this note at any time before maturity by paying the principal, accrued interest, and thirty days additional interest as a bonus."
Sec. 104. Where a mortgage is given by the purchaser to the seller as a part of the purchase price, it is proper to insert in the mortgage these or equivalent words: "This mortgage is given to secure the balance of the purchase price for the above described premises." This is called a "purchase money mortgage," and imports on its face its full consideration, and the title companies will pass such a mortgage even though it be on community property and be signed by the husband only.
Sec. 105. Where property encumbered by a mortgage is sold to a person who assumes the mortgage, such assumption by the purchaser should be set forth in the deed conveying the property in express words, so that there cannot be any room for misunderstanding. (See Form No. 13-i-1.)
Sec. 106. The borrower should be very punctual in paying the interest on his loan. Building and loan associations require payment of interest and a payment on account of the principal, to be made monthly; but whenever he can do so, the borrower should make his interest payable quarterly. If made payable annually, or semi-annually, the borrower has to accumulate and keep on hand monies with which to meet the interest for too long a time; quarterly payments on the whole will best meet the requirements of every one. Interest is not payable in advance, but for time past. Banks, as a rule, notify borrowers of the amount and date when interest payments become due. (See Form No. 30.) The borrower should not depend on receiving the notice, as a bank will occasionally overlook sending it out; he should have a memorandum of the exact amounts and precise dates when the several interest payments will fall due during the continuance of the loan and meet such payments punctually on that day or the day next preceding. The payments of interest, and of principal, are endorsed on the note.
Sec. 107. Of Mortgages.
(1.) A mortgage is a contract by which a specific property is hypothecated for the future performance of an obligation, without the necessity of change of possession.
(2.) Any interest in real property which is capable of being transferred, may be mortgaged.
(3.) A mortgage does not entitle the mortgagee to the possession of the property, unless authorized by the express terms of the mortgage.
j(4.) A mortgage can be created, renewed, or extended, only by a written instrument, executed with the formalities required in the case of a deed.
(5.) A mortgage is a lien upon everything that would pass by a conveyance of the same property. In California, mortgages on personal property are limited to such articles as are specified in the Civil Code, growing crops, grapes and fruit being among the properties enumerated. The lien on a mortgage on a growing crop continues on the crop after severance from the land, whether the crop remains in its original state or is converted into another product, so long as the same remains on the land of the mortgagor. The following has been held to be a good and sufficient description in a mortgage on growing crops:
"All of the crops and products of whatever nature, which are now standing or growing, or which shall or may hereafter at any time be sown, planted, cut or harvested by the said party of the first part during the continuance of this mortgage, on the following described lands and premises, situate, lying and being in the County of Santa Cruz, State of California, bounded and particularly described as follows, to wit:"
(6.) A mortgage of personal property, in California, is void as against creditors of the mortgagor and subsequent purchasers and incumbrancers of the property in good faith and for value, unless such mortgage is accompanied by the affidavit of all the parties thereto that it is made in good faith and without any design to hinder, delay or defraud creditors, and is acknowledged, certified and recorded in like manner as a deed. (See Form No. 38.) A personal property mortgage must be recorded in the office of the County Recorder of the county where the mortgagor resides at the time of making the mortgage, and if the property is situate in another county, also in the office of the County Recorder of that county, or of the county to which such property is removed.
(7.) Mortgages are executed, acknowledged, delivered and recorded the same as deeds. A mortgage should be recorded the same day the mortgagee receives it. If there is a "homestead" (See Chapter on Homes and Homesteads) on the property, and it is owned by a married person, it cannot be mortgaged or conveyed unless the instrument is signed and acknowledged by both husband and wife.
(8.) A mortgage may be assigned. The holder of the mortgage may make an assignment in writing, and such instrument, when recorded in like manner as the mortgage, operates as notice to all persons subsequently deriving title to the mortgage from the assignor. (See Form No. 32.) A transfer of the note carries with it the security, as the mortgage is the incident to the debt.
(9.) The mortgagee must pay the taxes on the mortgage under the California law. For a full explanation on this point see Chapter on Escrows.
(10.) The borrower of a thing for use must bear all of its expenses during the loan; and so where the mortgaged premises are improved, the mortgagor is required to keep the premises insured for the benefit of the mortgagee as the interest of the latter in the property may appear.
(11.) A mortgage which has been recorded, when paid, may be discharged of record in one of two ways, namely: By an entry on the margin of the record book, signed by the mortgagee or his assignee, acknowledging satisfaction of the mortgage in the presence of the County Recorder, or by an instrument of partial release (See Form 29), or of full satisfaction (See Form No. 31), either of which must be recorded at length.
(12.) The forms of mortgage (See No. 28) in use usually provide that if any installment of interest or of principal remains unpaid for a certain time, or if the mortgagor makes breach of any condition contained in the mortgage, the holder of the mortgage may, at his option, commence suit for the foreclosure of the mortgage and recovery of the property. If the mortgage is not renewed or extended at maturity, and is not paid, the holder, of course, may commence suit for fore--closure. The time in which suit may be commenced after default or maturity varies in different States. In California, such suit must be commenced within four years. If not commenced within the time limited, the mortgage "outlaws;" that is, the statute of limitations goes into effect, and no action can then be brought to foreclose the mortgage. In case of suit, the mortgagee has to bear the costs of foreclosure. If suit is determined in favor of the holder of the mortgage, a sale of the premises is ordered by the court; the officer making the sale (usually the Sheriff) must give the purchaser a certificate of sale, and file a duplicate thereof in the office of the County Recorder. The certificate of sale can be assigned. Sales had under powers given in mortgages or trust deeds are scrutinized with great care by the courts, as such sales are harsh methods, and will not be sustained unless conducted in all fairness and integrity. One action only can be maintained for the recovery of a debt or enforcement of a right secured by mortgage on real estate or personal property, and such action must first exhaust the security, and if that is not sufficient to pay the debt, then a deficiency judgment may be entered against the mortgagor by the court. Where a note was endorsed originally or by way of transfer, if the security is not sufficient to extinguish the debt, a separate suit can be maintained against the endorser for the deficiency.
(13.) All property, except personal property and leases, having less than two years to run, may be redeemed, in California, within twelve months after the decree of foreclosure has been entered. The right to redeem is called trie equity of redemption and may be exercised by any one who has an equitable or legal lien upon the property. The redemptioner must pay the purchaser the amount paid by the latter, together with one per cent per month thereon to date of redemption, and assessments and taxes paid by such purchaser, and interest thereon. The mortgagor has the right to remain in possession of the mortgaged premises, if he is occupying same, during the foreclosure proceedings and until the right of redemption has been exercised or has expired.
Sec. 108. Of Trust Deeds.
(1.) A trust deed is a conveyance by one party, called the trustor, to a second party, called the trustee, as security for the performance by the first party of an obligation in favor of a third party, called the beneficiary. Such a deed authorizes the second party, upon default of the first party to meet the conditions of the deed, to sell the property and apply the proceeds to the secured obligation. The names of the beneficiaries are not always expressed in the deed, as where such a deed is given to secure corporate bonds. Such a deed conveys the legal title to the trustee, to enable the latter to convey the property in the event it is sold upon the default of the trustor. (See Form No. 34.) When the secured boligation has been satisfied, the property is re-conveyed by the trustee to the trustor. (See Form No. 35.)
(2.) Declarations of Trust are made for various purposes, such purposes being set forth at length in the declaration. (See Subdivisions.)