SECTION TWO—] This is the Law BY WILLIAM JOSLIN (For the N. C. Bar Association) MORTGAGES The word “mortgage” has a defi nite meaning for almost everyone. The law concerning mortgages is contin ually growing in response to changing uses made of this device. This discus sion will deal solely with mortgages on real estate, although many of the principles discussed apply equally to mortgages on personal property, or “chattel mortgages,” as they are known. A mortgage has been defined as any form of instrument whereby title to ' real estate is reserved or conveyed as security for the payment of a debt or the fulfillment of other obligation. Thus, a mortgage can be used as se curity for the performance of the con ditions of a bond or other agreement. However, the most frequent use made of the mortgage is to secure the re payment a)f a loan of money made to the borrower, or mortgagor. His ob ligation to repay the loan is usually contained in a note or notes, which are, separate from the mortgage. The mortgage itself refers to the note or notes executed by the borrower, and states that the title to the property has been conveyed to the lender or mortgagee, who may, under certain conditions, enforce the payment of the note or notes through the foreclosure of the mortgage and the sale of the property. Deeds of Trust In North Carolina, the term “mort gage” is commonly used to include, in addition to the conventional mortgage, another paper known as a “deed of trust.” Instead of being a two-party instrument like the mortgage, the deed of trust is a three-party paper. The borrower in this type of instru ment conveys the title to his property to a trustee to secure the repayment of his note or notes to the lender. The | trustee has no direct interest in the security; he merely holds the legal ti tle to the property so long as the deed of trust is outstanding. It is his duty to forclose the deed of trust if a de fault occurs and if the lender demands foreclosure. For purposes of this ar ticle the term “mortgage” will include “deed of trust” as well, except where indicated otherwise. A mortgage must ordinarily meet certain formal requisites. First of all. it must he properly signed by the owners of the real estate included in the mortgage. Secondly, the proper ty conveyed as security must be des cribed sufficiently to permit its iden tification. Thirdly, the mortgage must state that the conveyance is condi tional upon the payment of a certain sum, or the fulfillment of certain con ditions. Finally, a mortgage should be recorded in the Register of Deeds office in order to give all persons no tice of its existence and to establish its priority. Failure of a mortgage NO MITE? l food ju»t doesn’t hold your interest when summer heat and humidity get you down. But you can change that Install a new Frigidaire Room Condi tioner in your home. 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Most mortgages for the payment of money in installments contain what is known as an “acceleration clause.” This clause provides that, upon de fault in making any payment under the mortgage, the mortgagee has an option to declare the full unpaid bal ance of the indebtedness due, and to foreclose for the payment of this en tire balance. Foreclosure may be accomplished in either of two principal ways: (1) Through the filing of a law suit; (2) Through the power of sale set out in the mortgage itself. The second of these two procedures is the one usual ly employed. The requirements of foreclosure un-' der the terms of the mortgage arei carefully set out in our laws. The ■foreclosure sale must be advertised for at least 30 days by posting a notice of sale at the courthouse and by newspa per advertisement. The actual fore closure sale is held at the courthouse and is in the form of a public auction, unless the court order or notice of sale provides otherwise. At the sale, the property is sold to. the highest bidder. The borrower can,' of course, bid at the sale. The sale I does not become final until ten daySj ihave elapsed, during which time the. bid may be raised. Upon the filing) of a raise of bid, the property must| be readvertised and resold at public auction. This procedure may be re-' peated as often as raises of bid are filed on the property. At any time nrior to the final expiration of time for raise of bid, the borrower can stop the foreclosure proceedings by paying off the debt, plus accrued costs. Deficiency Judgments Vlhat can the lender do if the prop erty fails to bring a price sufficient to pay off the indebtedness? Subject to one important exception noted be low, the lender can sue the borrower and obtain a judgment requiring him to pay the difference between the mortgage debt and the amount realis ed from the foreclosure sale. Such a ; judgment is spoken of as a "deficiency {fa*. 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The lith Army Engineer Ceneiraetien Battalion was awarded the Republic es Rena Frrridwittal Untt CKattcn far bntldlag the bridge. judgment." Under North Carolina law a lend- ' er cannot bring suit for a deficiency judgment where the mortgage was ; originally given to secure the payment of the balance due upon the purchase price of real estate. In other words, the lender must rely solely upon the real estate to recover the balance due upon a purchase money mortgage. This rule of law was enacted during the depression of the 1930’5. Transfer of Mortgaged Property Can the borrower on real estate transfer the property without paying 1 off the debt ? Ordinarily, the borrow l er can sell or otherwise dispose of the I property as he sees fit, leaving the mortgage debt unaffected. The new ) owner of the property must, of course, | keep up the payments on the mortgage. The holder of the note secured by the i mortgage must accept payments of the debt from the new owner of the property. If the new owner of the mortgaged real estate default in his payments, ’ can the original borrower still be forced to make these payments? As a practical matter, the question seldom arises. The holder of the debt ordi , narily depends only on the real estate : for payment. As a matter of law, he • is required first of all to foreclose • against the real estate. If the mort i gage, as shown on its face, was origi ■ nally a “purchase money mortgage,” ■ then, as noted above, the land alone i must stand for the debt. The fact - that the original borrower has trans ferred his interest to another does not alter this fact. If the mortgage was not originally a “purchase money mortgage,” then, the borrower can be required to make up any deficiency of the mortgage debt after foreclos ure. Any subsequent owner of the real estate, who expressly agreed to pay the debt, can likewise be required to make up any deficiency. 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