Real Estate Law Essay

Research and provide Texas statute(s) on the foreclosure process

Texas foreclosure can either be judicial or non judicial, (Texas Foreclosure Laws, 2009). In Judicial, the foreclosure law states that a lawsuit has to be filed for one to access a court order to a foreclosure. The court will make judgments depending on the claims they receive in favor of the lender over the balance due on the borrower. Hence the judge will order the sheriff to auction the property to the highest bidder.

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In the Non Judicial as per the foreclosure Texas laws, the lender would give a default written notice to the debtor. The borrower is given 20days to service the debt after which the debt will have to be declared due thus a sale notice would be given. The lender will give instructions to the trustee to continue with the process of foreclosure.

What is the title and lien theory?

Title theory states that the borrower has to give the legal title to the designated individual who has been specified by the lender but the borrower retains equitable title. Lien theory states that the mortgagor has to retain both the legal and equitable title pertaining to property and thus the mortgagor would use his property with loan being a lien against the property for him to secure the debt, (Turnbull, 1996).

What is the difference between the two theories?

In title theory the mortgagee own the property until the mortgagor pays the debt however the mortgagee permits the mortgagor to posses and use the property. Since the mortgagee has the legal title to the property so incase the mortgagor fails to pay back the loan he would have the legal right to possess the property inclusive of its revenue.

In lien theory when the mortgagor defaults in the payment of loan, the mortgagee would be forced to undergo formal closure proceedings for him to access the legal title. The formal proceedings normally entail the process of auctioning the property to the public so as to cover the balance of the debt, (Weicher, 2006).

What are the advantages and disadvantages of each theory?

The advantages of the title theory is that it is less costly and fast for the mortgagee for he would possess the property immediately the mortgagor defaults hence avoiding the long legal  process of accessing the legal title has in the lien theory. In lien theory foreclosure process may take long period hence the mortgagor would take advantage of not servicing the loan even though he would be getting some revenues from the rented property. The disadvantage of the title theory is that the mortgagee may use legal title of the mortgagor for other purposes to benefit themselves or they may deliberately raise the interest rates accrued on the loan so that the borrower fails to pay the loan so as to get full ownership of the property. The advantage of the lien theory is that it gives the mortgagor liberty to command authority over his property as long as he serviced the loan; hence it avoids the risk of putting the legal title under their custody.

Is Texas jurisdiction a lien theory or title theory state and how does the foreclosure process apply in this context?

Texas is under lien theory of mortgages. The foreclosure applies when the mortgagor defaults in paying the loan, hence the mortgage would use state laws as applied in the land in the process of recovering his money. Hence the lien theory states gives the mortgagee a right to security that is capable of being enforced through foreclosure in the event the mortgagor breaches the contract.

Explain the differences between FHA and VA loans, including qualifications, eligibility, etc

FHA is an excellent option for people considering purchasing a home because of its low down payment. To be eligible for this kind of mortgage one must have a credit history that is satisfactory showing commitment to pay loan within the stated timeframe and furthermore one must prove that the monthly total mortgage payment would be not more than 29% of one’s monthly income, (Weicher, 2006).

The VA loan is a kind of mortgage that is offered to the American veterans or their surviving spouses provided that they have not been remarried.  The purpose of VA is to provide home financing to American veterans in regions where private financing doesn’t exist.  This VA helps American veterans to acquire properties with virtually no down payment. To be eligible to this financing one must have been in active duty for not less than 90 days and should have been discharged from duty honorably, (Sirmans et al ,1991).

Choose four (4) types of mortgages from the following list and compare and contrast these types of mortgages

Amortizing

This is a kind of loan that involves payment of the principle amount of the loan over the lifetime of the loan as per the amortization schedule through equal payments.

Adjustable Rate (ARM) or Variable Rate

This is a kind of mortgage loan that involves adjustment of the interest rate on the note periodically basing on the variety of indices and among the most common indices used are the costs of funds index, London Interbank Offered Rate etc.

Shared Appreciation (SAM)

This is a kind of mortgage whereby the lender agrees as part of the loan to accepting some or the all the payment in the form that is proportional to the increase in value of the property. The lender agrees the interest rate to be lower than that prevailing at the market in exchange for a proportion of the appreciated value of the property taken as security known as contingent interest.

Graduated Payment

This is a kind of mortgage loan that has low initial monthly payments but it gradually increases over the time frame specified. This kind of mortgage is recommended for those young men and women in school who cannot afford large payments at that respective time but would be financially better in the future for they would be able to secure good jobs with high income. This kind of mortgage is a form of negative amortization loan, (Turnbull, 1996).

Reference

Sirmans, C. and et al (1991). ‘‘The Markets for Housing and Real Estate Broker Services,’’ 2 J. Housing Econ. 208.

Texas Foreclosure Laws accessed online on 3rd June 2009 URL:http://www.foreclosureuniversity.com/studycenter/foreclosurelaws/texas.php

Turnbull, G (1996). ‘‘Real Estate Brokers, Nonprice Competition and the Housing Market,’’ 24 Real Est. Econ. 294.

Weicher, J (2006).The Price of Residential Real Estate ‘‘Brokerage Services: A Review of the Evidence, Such as it is,’’ 35 Real Estate L.J. 118.

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