BluegrassForeclosure.com

Ok, so we went over what an actual Master Commissioner is and what he or she does here.

For Tip #2, let’s discuss the difference between a “note” and a “mortgage”?  The note is the actual contract that loans money to an individual.  The individual agrees to pay back that money at a certain interest rate.  There can be one, two, or more individuals on the note.  So that is why sometimes you only see one spouse who has signed the note.  Most banks will want as many people obligated on the note though, so it is more than willing to take several other co-signers, if it can get them to sign.

The mortgage on the other hand, acts as a lien against the collateral, in this case, the collateral is the real estate, home, or other building that the bank will take an interest in.  If the debtor defaults, it is presumed that the bank will be made whole taking back its collateral and selling it off, to earn its money back from the note.  Kentucky still has dower and curtesy rights, something I’ll go over in a later post.  The short answer is that once an individual gets married, the spouse has an immediate interest in any property.  That is why there can be one spouse on a note, but both spouses must sign a mortgage.  That is also why you sometimes see a bank suing an “unknown” spouse.

For a mortgage to be enforceable, it must be recorded.  Kentucky is generally a “race-notice” state, meaning that the first person or bank to record its mortgage at the county clerk’s office, takes first priority.  Thus, it is a “race” to the courthouse to see who can file or record the lien first.  Recording the lien in the county clerk’s office gives “notice” to everyone else that you have a lien, what that lien is, and how much you are owed.  There are a few small exceptions to this rule, which I’ll go over in a later posting.

Every other entity that files a lien after that first lien just falls in line in order that they filed in.  A piece of property can have numerous liens on it, such as a first and second mortgage, judgment liens, home equity lines, and many others.  That’s why it is important for you to file a lien against a piece of property as quickly as possible.  Recording the lien puts everyone on notice of your interest in the property.

Right now, with so many banks foreclosing on their notes and mortgages, they have a glut of real estate owned that they need to get rid of.  A great time for the foreclosure investor.

I hope this helps clear up some questions about notes and mortgages.  For the next post, I’ll go over what happens pre-foreclosure.