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The term "mortgage" refers to the document that creates the lien on real estate and is recorded in the local office of deed records to provide notice of the lien secured by the creditor.The creditor or lender, also called either mortgagee (in a mortgage) or beneficiary (in a deed of trust), is the owner of the debt or other obligation secured by the mortgage.In order for the rights of the secured party to become enforceable against third parties, however, the secured party must "perfect" the security interest.
Article 9 of the UCC governs the creation, perfection, and priority of security interests of a creditor, also called a secured party, in the personal property of a debtor, including fixtures.
Like a mortgage lien, a security interest is a right in a debtor’s property that secures payment or performance of an obligation, created in a separate security agreement, or by additional terms right in the mortgage or deed of trust document.
Although a deed of trust securing real property under a debt serves the same purpose and performs the same function as a mortgage, there are technical and substantive differences between the two.
A deed of trust is executed by the debtor and property owner, to a disinterested third person identified as a trustee, who holds the ownership of the property in trust for the creditor; whereas, when a mortgage is used, title to the collateral remains in the debtor, and the mortgage creates a lien on the real estate in favor of the creditor.
The deed of trust requires the trustee to reconvey the property back to the debtor when the debt has been paid in full.
Assignment of the creditor’s interest does not result in a change of trustee; instead, only the note or other evidence of debt is transferred and the new owner of the loan acquires the prior lender’s beneficial interest in the trust.
[continue reading...] A cognovit note is a promissory note in which a debtor authorizes the creditor, in the event of a default or breach, to confess the debtor’s default in court and allows the court to immediately issue a judgment against the debtor.
If the debtor defaults or breaches any of its loan obligations, the cognovit note also typically provides that the debtor agrees to jurisdiction in certain courts, waives any notice requirements, and authorizes the entry of an adverse judgment.
For commercial lending purposes, an assignment of leases assigns the debtor’s rights, as landlord under a lease or leases, to the creditor for the collection of rent as additional security for a debt or other obligation.
The assignment grants to the creditor a security interest in the rent stream from any leases affecting a property, an important source of cash to pay the note in case of the borrower’s default.