
REAL PROPERTY
Chapter 4
Security Arrangements
I. GENERAL CONSIDERATIONS
§ 4:1 Introduction
II. MORTGAGES AND DEEDS OF TRUST
A. GENERAL CONSIDERATIONS
§ 4:1A Testing PAX character entities
§ 4:2 Denitions and nature
§ 4:3 Kinds of mortgages
B. FORM DRAFTING PRINCIPLES
§ 4:4 General requirements
§ 4:5 —Purchase-money mortgages
§ 4:6 Parties
§ 4:7 Consideration
§ 4:8 Property subject to lien
§ 4:9 Obligations secured
§ 4:10 Formal requirements
§ 4:11 —Balloon mortgages
C. TAX ASPECTS
§ 4:12 In general
§ 4:13 Tax position of mortgagor
§ 4:14 Tax position of mortgagee
§ 4:15 Foreclosure of mortgages and deeds of trust
D. CHECKLISTS
§ 4:16 Checklist—Drafting a mortgage
§ 4:17 —Drafting note for use with mortgage or trust
deed
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§ 4:18 —Drafting wraparound agreement
§ 4:19 —Drafting mortgage or trust deed subordination
agreement
E. COMPLETE INSTRUMENTS
§ 4:20 Mortgage—General form
§ 4:21 —Wraparound
§ 4:22 —Balloon
§ 4:23 —Securing note and indemnication agreement
§ 4:24 —Short form
§ 4:25 —Without defeasance clause
§ 4:26 —Ground lease
§ 4:27 —With security agreement
§ 4:28 —On building built on land leased from
mortgagee—Including land lease and promissory
note
§ 4:29 —Residential property
§ 4:30 Mortgage and security agreement—In lieu of
foreclosure—Subject property purchased from
and leased back to mortgagee
§ 4:31 Purchase-money note and mortgage
§ 4:32 —Partial release of portions of mortgaged
property
§ 4:33 Deed of trust
§ 4:34 Promissory note
§ 4:35 Mortgage demand note for relocation loan in
excess of $10,000
F. OPTIONAL PROVISIONS
1. Duties and Options of Mortgagee
§ 4:36 Covenant to subordinate purchase-money
mortgage to construction loan mortgage
§ 4:37 Surrender of mortgage on payment
§ 4:38 Option to make future advances
§ 4:39 Contingencies resulting in acceleration of
maturity
§ 4:40 —Acceleration of prior mortgage
§ 4:41 —Default in payment
2. Duties and Options of Mortgagor
§ 4:42 Prepayment—Entire principal balance and
interest
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§ 4:43 —Multiples less than entire balance
§ 4:44 —Penalty on excess prepayment
§ 4:45 Mortgagor's care and use of property
§ 4:46 Statement of tenancies, rentals, and sale
§ 4:47 Mortgagor to provide monthly operating
statements
§ 4:48 Due on sale or further encumbrance clause
§ 4:49 Waiver of statutory rights
§ 4:50 Covenant for notice of litigation aecting
mortgaged property
§ 4:51 Environmental and hazardous materials clause
§ 4:52 Environmental site assessment
§ 4:53 Environmental indemnity
3. Other Provisions
§ 4:54 Balloon mortgage legend
§ 4:55 —Variable, adjustable, or renegotiable rate
mortgage
§ 4:56 Release upon payment of obligation
§ 4:57 Prepayment—Without penalty
§ 4:58 —With penalty
§ 4:59 Agreements with respect to rst mortgage in
wraparound mortgage
§ 4:60 Consent to subordinate mortgage
§ 4:61 Clause in relocation mortgage—Setting out
purpose of loan
§ 4:62 Clause in mortgage—Use of proceeds
§ 4:63 —Sale or other conveyance of mortgaged property
§ 4:64 —Termination of employment
§ 4:65 Clause in relocation term mortgage—Sale or
other conveyance of mortgaged property
§ 4:66 —Loan agreement regarding termination of
employment
§ 4:67 Exemption of mortgagor from personal liability
§ 4:68 Identication of rst mortgage in second
mortgage
§ 4:69 Assignment of rents and prots
§ 4:70 —With covenants and representations regarding
leases
III. RELEASES, TRANSFERS, AND
EXTENSIONS
A. RELEASES
§ 4:73 Form drafting principles
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§ 4:74 Checklist—Drafting release of mortgage or deed
of trust
§ 4:75 Satisfaction of mortgage
§ 4:76 —Statutory form
§ 4:77 —By corporation
§ 4:78 —By corporation Alternate form
§ 4:79 Release of part of mortgaged premises
B. TRANSFERS
§ 4:80 Introduction
§ 4:81 Form drafting principles—Transfer of mortgagor's
interests
§ 4:82 —Transfer of mortgagee's interest
§ 4:83 Checklist—Agreement for assumption of
mortgage or trust deed
§ 4:84 Assumption of mortgage by recital in deed
§ 4:85 Assumption agreement
§ 4:86 Assumption of liability and modication
agreement—Original borrower remains liable
§ 4:87 Assignment of mortgage
§ 4:88 Assignment of leases—Rents and prots
C. EXTENSIONS
§ 4:89 Form drafting principles
§ 4:90 Checklist—Drafting extension of mortgage or
deed of trust
§ 4:91 Mortgage consolidation and extension agreement
§ 4:92 Extension and modication agreement—Changing
loan terms and extending maturity
§ 4:93 Modication of wrap around mortgage
IV. FEDERAL TRUTH IN LENDING ACT—REAL
ESTATE TRANSACTIONS
§ 4:94 Introduction
§ 4:95 Checklist—Form drafting principles—Federal
Truth in Lending Act—Transactions covered
§ 4:96 Disclosure requirements—In general
§ 4:97 Checklist—Form drafting principles—Disclosure
requirements—For closed-end extensions of
credit
§ 4:98 Disclosure statement—Loan secured by real
property
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§ 4:99 —Credit sale secured by real property
§ 4:100 Notice of right of rescission
§ 4:101 —Renancing
Scope
This chapter contains forms for use in security arrangements
involving real property, together with pertinent legal principles
and tax comments that should be considered when drafting such
documents.
Treated Elsewhere
Chapters that contain related text and form material are Sales
(see Ch 1), Conveyances (see Ch 2), Mechanics' Liens (see Ch
13), Real Property (see Ch 16A), Personal Property (see Ch 16B),
Consumer Credit (see Ch 17), Commercial Paper (see Ch 43),
and Secured Transactions (see Ch 49).
Research References
The material cited below is generally applicable to security
arrangements. Material that is applicable to particular aspects
of the topic is cited in footnotes throughout the chapter and in
Drafter's Notes following particular forms.
West’s Key Number Digest
Mortgages ”1to319
A.L.R. Library
Conveyance or surrender of property as an accord and satisfaction
of contract obligation, 59 A.L.R.5th 665
Discharge of mortgage and taking back of new mortgage as aect-
ing lien intervening between old and new mortgages, 43 A.L.R.
5th 519
Financing agency's liability to purchaser of new home or structure
for consequences of construction defects, 20 A.L.R. 5th 499
Promissory estoppel of lending institution based on promise to
lend money, 18 A.L.R. 5th 307
Construction mortgagee-lender's duty to protect interest of
subordinated purchase-money mortgagee, 13 A.L.R. 5th 684
Construction and eect of statutes requiring construction fundholder
to withhold payments upon “stop notice” from subcontractor,
materialman, or other person entitled to funds, 4 A.L.R. 5th 772
Validity and construction of provision of mortgage or other
real-estate nancing contract prohibiting prepayment for a xed
period of time, 81 A.L.R. 4th 423
Applicability of Article 9 of Uniform Commercial Code to assign-
ment of rights under real-estate sales contract, lease agreement,
or mortgage as collateral for separate transaction, 76 A.L.R. 4th
765
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