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Sign in Maryland Promissory Note Template for Banking

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Countersign promissory note

- Hey everybody. My name is Paul Vojchehoske and welcome to the Real EstateClassroom, YouTube channel. So in today's video, we're gonna discuss the promissory note and the mortgage. In my next video, we're gonna discuss the deed of trust, all right? It just seems like thepromissory note, the mortgage and the deed of trust isvery difficult for students to understand these concepts. So I wanna make sure that Ido a good job on this video, but, the promissory note and the mortgage is where we're gonna start, and I'm gonna give youeverything that you need to know, in this video. (bright upbeat music) Okay, so in this video,we're gonna discuss two legal, separate distinct instruments called the promissorynote and the mortgage and as I said in my opener, in the next video, I'm gonnadiscuss the deed of trust or sometimes called the trust deed. It is a concept, all threeof these instruments, people just seem, studentsjust seem to have a hard time comprehending how it all works. But we're gonna do our best in this video to conceptualize it. So, the way I like to approachthis before we actually get into anything here is to, because most of us have purchased vehicles and most of us have borrowedthe money from the bank for the vehicle and so weunderstand that process and by understanding that process, it helps us to conceptualize this process that we're gonna discuss in the video. So think about this, when youborrowed money from the bank to purchase a car. The first thing that you did is qualified, so, you had to make application, they did a credit check and all of that, that's the same if you're buying a house and then if you were approved, eventually you had to signall these loan documents. Well, actually what you were signing was called a promissory note. And that promissory notedid a lot of things. And we're gonna talk aboutspecifically the promissory note but, you were signing the promissory note, it said that it's a,you know, 48 month loan, a 60 month loan is 72 month loan, and the loan is the rate, theinterest rate's 4.5 percent, and if, you know, thenthere's late payments if you're late on or latefees, if you're late on the payments et cetera. However, what did the bank also want? In addition to those loan documents called the promissorynote that you signed, what did they insist on having? And that is the title to the vehicle because the title to the vehicle is the collateral forthat promissory note. So if you stop making your payments, because the bank is holdingonto the title to the vehicle, that gives them the rightto repossess the vehicle, understand this and mostpeople don't understand that if the bank did not have physicalpossession of that title, you sign the promissory note,they gave you the money, but you failed to deliverthat title to the bank. They actually did nothave the legal authority to repossess the vehicle, if you stop making yourhou-- or your car payments, it's the same way with thepromissory note in the mortgage. So instead of the title to the vehicle, the bank in the case of ahome loan wants the mortgage. And we have to understandthese two distinct, separate, individual legal documents. So, let's define both of them. The first one is the promissory note. The promissory note is a loandocument whereby the borrower also known as the mortgagor, promises simply to repay a debt over a specified period of timeat a certain interest rate. Now, promissory notes canbe secured or unsecured in the case of borrowingmoney for the vehicle and the bank asking forthe title to the vehicle, that's what we called a secured note. If you've got a signature loan where you just went down to the bank and borrowed a couple thousand bucks, in fact overdraft accountsfor your checking account is considered an unsecured promissory note because there's nothing thatcan the bank can repossess, in the case of a default of payments. Now, a mortgage is an instrument, it's a legal document that pledges or gives the actual realproperty as security or collateral for the loan, in case the borrower defaults. It is like the title to thevehicle if you will, all right? The mortgage is the collateral for the promissory note thatthe borrower is gonna sign. All right, in today's video,we've already started, but just some key terms,key real estate terms that we are gonna hone in on, and I've already talked abouta couple of them already, promissory note, a mortgage,the mortgagor, the mortgagee we're gonna discuss thepledge more in details, and then there's a conceptcalled hypothecation. We need to know about defeasance clause, an alienation clause,an acceleration clause, assignment of rents anda satisfaction piece. Now, some of this we've also discussed in previous videos as well but, these are really keyterms that we have to know when we're discussing the promissory note, the mortgage and a deed of trust. All right, let's start withthe promissory note first, understand as we said before, a promissory note canbe secured or unsecured, and it's basically a document that provides evidence of a loan, and it's evidence of a loan between the mortgagor who's the borrower and the mortgagee who's the lender, and it's just considereda basic loan document. Now, there is some important language that's typically includedin this promissory note. Number one, it'll, typically state theamount that's borrowed, it'll state the interest rate at which the bank isloaning you the money, it'll have a place for the time placed and the amount of themonthly payments to be paid. It'll discuss whether or not there's a prepaymentpenalty involved or not, and if there is, what are the terms of that prepayment penalty, and then it usually buildsin a lot of consequences, if the borrower defaults such as late fees and the lender's rightto call the note due those types of things. And then typically it will also state if it's a secured orunsecured promissory note. So maybe it'll identify the collateral, like the title to the vehicle or the mortgage to the house, right? That's a promissory note, pretty simple. The next thing I wannatalk about is the mortgage. This is kind of what confuses everybody. And remember the mortgage and the promissory notego hand in hand here. So the mortgage is anadditional instrument, it's a legal instrument thatactually pledges the property as security or collateral for the debt that's identified in thepromissory note, all right? Now, some states use the mortgage process and some States use whatwe call the deed of trust. And there are some distinctdifferences between the two, for example, Iowa, the stateof Iowa is a mortgage state. So if you were an Iowa andyou were buying a house, you would sign the promissory note, but you would also then use a mortgage, you would sign a mortgageover to the bank, and that mortgage is likethe title to the car, that is the collateral in case you default on the promissory note ordefault on making your payments, that mortgage then gives the authority to the bank to go and forecloseon the property, all right? Number two, the mortgagor,who is the mortgagor? That is the borrower,understand in mortgage states, the mortgagor, the borrowerretains legal title to the property and themortgagee who's, the lender simply has a lien against the property, just like your vehicle. When you buy a vehicle andyou hand over the title, you still own the vehicle, but the bank has a lienagainst that vehicle in case you default. Now, there is a key term you have to know it's called hypothecation andI have it on your screen here. This is the legal doctrineand it allows the borrower to, pledge that real property as collateral but, they don't have togive up the legal right to possess and use it justlike a vehicle, all right? Just like a vehicle. Now, the mortgage is atwo-party relationship, and the two parties involvedin that relationship is the mortgagor and the mortgagee, the borrower and the lender. Why that's important isbecause when we talk about the deed of trust you're gonna discover that there are threeparties involved all right? And then the mortgage is a specific lien and it's a voluntary lien. We discuss those twoconcepts in different videos, but it's specific to the lienis specific to the property, that's being pledged as collateral, and it's also being voluntarily, the lien is givenvoluntarily to the lender. All right, so rememberthe mortgage is a document that the mortgagor gives to the mortgagee, so it's a document that theborrower gives the lender, that number one, pledges the property as collateral for the loanor the promissory note, and it's voluntary and it creates the lien against the propertyin case the borrower defaults, the lender can foreclose. I know, I feel like I'mkilling a dead horse here, but I really like to be repetitive here, so that, so as a student,you can understand, I kinda teach thispart, like kindergarten. Number five, elements of a mortgage, meaning what are those? What's the language that'scommon in a mortgage, in that instrument called the mortgage. Some of this we've alreadytalked about in a previous video, but we're gonna cover it again. Number one, it's gonna have, what's called the defeasance clause, this defeasance clausesays that the mortgage, remember the mortgageis the pledged property, that places the lien against the property. It is defeated when thepromissory note is paid in full and the terms of themortgage have been completed. So when you pay off the loan in accordance with the promissory note, then it basically saysthe lender then has no, it defeats the lender'sposition in the property. It's a legal technical way of saying that the lender has no moreinterest in the property, defeasance clause. Another clause is calledthe alienation clause or sometimes called a due-on-sale clause, two key terms I guarantee is gonna be on your real estate exam. It just simply says that tells the mortgagor, the borrower that if you sell the property, then the first debt that ispaid is the mortgage, okay? The acceleration clause,this permits the mortgagee now, who's the mortgagee? The mortgagee is the lender. Two e's in lender two e's and mortgagee, it permits the mortgagee to call the entire somedue and payable now, upon default of payments. And then another commonclause that you're gonna see is what's called assignments of the rent or assignment of rents. This was really popular,this really came to light in the mortgage crisis of 2008, 9, 10, 11, where all these investment properties, the mo--, the landlord was going bankrupt and what the banks were doing because of the assignment of rent, the banks were going directlyto the tenants and saying, you're gonna pay yourmonthly rent directly to us, not the landlord and what gives them the legal authority to do that? It's the assignment of rents clause, that's put into the mortgage. Couple other things I needyou to know about a mortgage. Number one, when thatmortgage is paid in full, or that promissory note is paid in full, and the borrower has adhered to the, all the terms of the, the mortgage. What's the proof that it's been paid off? So think about the car loan. So you give the title to the bank because that's collateralin case of default. But, when you pay off the promissory note, when you fulfill the termsof the promissory note, you've made your lastpayment, what happens? Well the bank sends you the title back, and it'll say, lien removed on the title, it removes the lien, right? That is the evidencethat the promissory note was paid in full or theloan was paid at full. Well what the bank or thelendor, I'm sorry the lender, which is the mortgagee wouldwhat they're gonna send you once you've completed theterms of that promissory note, they're gonna send you what'scalled a satisfaction piece or sometimes called a mortgage release, and that is the evidence that you paid this loan off in full. And then the last thing is wekeep talking about default, what happens if the borrowerdefaults on payments? Well, you really need to knowthat if it's, if for example, you're in the state of Iowa,that's a mortgage state, then the foreclosure has tobe a judicial foreclosure. If, in our next video, when we talk about the deed of trust and those states thatuse the deed of trust, that is a non-judicial foreclosure two terms that you have to know. Basically just means that, inthe state Iowa, for example, if you have a mortgageand it's foreclosed upon, it has to go to court, and actually the foreclosureprocess has play out in front of a judge. That's simply what it means so. All right, if you're gonna continue study, and I highly recommend that you click the deed of trust video to my right here, because the deed of trust and the mortgage and promissory notekind of go hand in hand. And if you have notsubscribed to our channel yet, I would really appreciate you doing that. Click the little circle tomy left and like always, if you have a question oryou'd like to leave a comment, put it down below in the comments section. Cause we love comments and questions. I'll see you in tomorrow's video.

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