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Property II
Property II
66
Other
Not Applicable
04/07/2013

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Term
Fifth Amendment
Definition
The takings clause is founded within the 5th Amendment and requires just compensation for takings
Term
Taking
Definition
The exercise of the eminent domain power, taking private property for public use.

Takings Clause Requires:
1. Taking is for a PUBLIC use;
2. The Government provides Just Compensation
Term
Public Use
Definition
Hx:
1. Open land to gen public (public parks)/common carrier; or
2. Provides services to the General Public, benefit public (hospitals, railroads, etc.)
3. Cure public harms/urban redevelopment

Modernly interpreted as Public Purpose
Term
Public Purpose
Definition
1.Looking at the plan as a whole and not each individual property
2. Purely private taking without a legit government purpose is void.
3. Taking land for a comprehensive development plan is public use, but no taking from private owner to private owner, if for future public use then private to private ok

Kelo- In response, Modern interpretation limited at the state level.

Policy- promote economic development. Legislature decides what land to use for public purpose.
Term
Just Compensation
Definition
1. Fair Market Value: recent sales of neighboring similar properties
2. NOT subjective value, merely marginal value (confiscates personal value/intrinsic value/surplus value)

3. Nominal damages have been upheld (Loretto $1)

Policy- Holdout problem of selling to government, just TAKE, that way it is fair, utilitarian, efficiency, justice.
Term
Takings Per Se
Definition
1. Permanent Physical invasion (regardless of size/extent of occupation)
Compensation can be nominal damages (Loretto $1)
--Deprives the owner the right to exclude, power to control use, and value of the right to sell/dispose

2. Regulation is a taking where it deprives owner of the only profitable use Or almost all economic value
- Economic impact test by Diminution of Value test-> if the regulation causes such diminution value it is a taking.

Note: Conceptual severance
Term
Conceptual Severance
Definition
Subdividing land into smaller estates, the smaller the estate the more likely a taking with be found. The smaller the land, the less likely uses.

OR breaking up a bundle of rights
Term
NOT a taking per se (no just compensation required)
Definition
1. Does NOT deprive the owner of all economically viable uses (exception [Lucas]...can't deprive owner of rights that were inherent in title...can't take rights they didn't have)
2. AND is a Nuisance regulation:
Nuisance analysis:
-benefit conferring = non-nuisance
-harm preventing = nuisance
Term
Regulatory Takings/Historical landmarks
Definition
Balancing test:
1. Economic Impact
-Impact of the regulation on the owner. Investment backed expectations of regulations
2. Character of Government Impact
-whether it results in a permanent physical invasion of the property
-whether it is a nuisance violation
-whether it promotes a permissive state interest
Term
Tackling TAKINGS questions:
Definition
Character of the government action:
o 1. Does the law require a permanent physical occupation of the land?
• If yes, this a taking per se. It is a regulatory taking and compensation is required.
• If no, ask next question.
o 2. Does it deprive the owner of all economically viable uses?
• Yes, it is a taking per se. No further inquiry is necessary, just compensation is required.
• No, ask the following question.
o 3. Does the law not deprive the owner of all economic viable uses and can it be characterized as a nuisance regulation?
• Yes, it is NOT a taking per se.
• If no, gray zone.

Gray zone:

1. Whether and to what extent the law frustrates the owners investment backed expectations? (detriment to the land owner)
2. Consider the character of the purpose served. The character of the action and other unique circumstances.

Balancing Test:

o (1) whether the taking substantially advances a legitimate state interest. AND
o (2) whether it denies the owner of economically viable use of his land.
Term
Tackling TAKING questions with case names
Definition
Penn Coal- Apply a balancing test to determine whether the was in fact a taking; unless
Loretto- if a law results in a permanent physical occupation of someone’s land= takings per se; OR
Lucas- denial of all economically viable use of property is a taking
Hadacheck- Nuisance regulations not a taking (generally)
Lucas Caveat- ANY regulation (including nuisance regulations) that result in a landowner with NO economically viable use of his/her land IS a taking.
EXCEPTION- where the regulation restates existing property laws already established under CL or nuisance law.
Term
Exactions
Definition
Conditions local government place upon granting for permit for land use development.
-Typically requires a concession of property rights or fee ($)
There must be some nexus between relation in nature (nexus) and extent (rough proportionality).

*If both the tests are not passed, then the exaction is a taking and just compensation is required. (Smythe confirmed)
Term
Nexus Test
Definition
requires nexus between exaction demanded (condition) and purpose for the permit (public interest served)

Nolan- easement to beach. regulatory scheme was enacted so the the public could view the beach. Here there is no nexus. Seeing the beach is not the same as easement to get to beach.
Term
Rough Proportionality Test
Definition
If there is a nexus, is there enough proportionality between the size of the condition and the impact of the proposed development?



Dolan- set aside land for drainage, purpose to prevent flooding (yes nexus), traffic and required set aside bike strip (yes nexus). Proportionality amount of land set aside for drainage was too great, bike path would not impact traffic enough to require it, no proportionality= TAKING
Term
Landlord/Tenant Relationships-
leasehold estates
Definition
1. Term of Years
2. Periodic Tenancy
3. Tenancy at Will
4. Tenancy at Sufferance/Holdover Tenancy

Note: Trend-use doctrines of K law to construe the intent of the parties. Ex. "Tenancy at will determinable"
Traditionally was to fit lease into one of the four types. (numerus clausus)
Term
Term of Years
Definition
Lease that specifies a beginning and end date; or provides some fixed formula that the term of the lease is certain
-Specified start and end
-Any length (can be as short as a day or as long as 99 years)
-termination is automatic

Example: Hotel Room
-no notice required
Term
Periodic Tenancy
Definition
-Lease that is continuous from one period to the next period unless one of the parties terminates the lease.
-Period stated expressly or defined implicitly
-No need for an "express" agreement as to the period
-Sometimes courts will define the period by inferring into the lease
--ex. farm (annual cycle)
--ex. certain amount per year payable monthly
Termination-Notice is required.
CL= 6 months to terminate 1 year
Modern = 30 days at end of the next month
ex. most residential leases
Term
Tenancy at will
Definition
Lease in which there is no stated duration and may be terminated by either party at any time
-no stated duration
-either party may terminate, any time
-created by expressly or by implication
--implication possession without agreement
Termination- CL required no notice, modernly = 30 days
Term
Tenancy at Sufferance/Holdover Tenancy
Definition
arises when a T fails to vacate premises at the end of the lease and continues to occupy the premises after the lease has expired.
LL has 2 options:
1. Evict the holdover T
2. Bind Holdover T to new leases

SOME states term of years
OTHERS periodic tenancy
If bound, most states, no more than one year.
Term
Federal Fair Housing Act
Definition
prohibits LLs from discriminating against tenants based on their
1. race,
2. sex,
3. family status,
4. national origin,
5. religion,
6. or handicap
ex:
1. does not prevent LL from limiting number of occupants
2. cannot refuse to rent a one bedroom to single parent with children
3. LL can refuse to rent to an unmarried heterosexual couple and/or homosexual couple

CA Fair Employment and Housing Act:
Provides protection to additional classes of persons not protected under the FHA.
7. sexual orientation,
8. martial status,
9. source of income,
10. and ancestry
Term
Assignment
Definition
T normally may assign unless that right is expressly restricted in the lease.
Lessee conveys ENTIRE interest in the lease.
- LL can sue assignee under privity of estate
- LL can sue original T under privity of contract
- LL cannot sue original T under privity of estate
- LL cannot sue assignee under privity of contract (fact specific)
Assignor does not retain reversionary interest

CL: T retains reversionary interest= assignments
Modern: Look at intent of the parties (3 factors)
(a) right to re-enter;
(b) rights and obligations imposed;
(c) language of the K (but this is not dispositive)

Policy: language CANNOT be dispositive b/c most lay people do not know the difference between a sublease and an assignment
Term
Sublease
Definition
Lessee conveys less than the remaining interest in the lease, thus retains a reversionary interest.
-LL has to go after original T, the original T can go after sublessee for rent.

-If there is a lease between L and T and T SUBLETS the property to T1, that sublet does NOT create privity of K OR estate ->
thus, L CANNOT sue T1 under any theory;
L can ONLY sue T for the rent owed;
creates privity of K AND estate between T and T1; therefore, T can sue T1 under any theory
Term
Consent requirement for assignment or sublease for COMMERCIAL TRANSACTIONS
Definition
Majority: LL may refuse consent arbitrarily or unreasonably

Minority: Requires LL shows commercially reasonable reasons
Reasonable factors:
1. Financial Responsibility
2. Suitability of the Use for the Particular Property
3. Legality of Proposed Use
4. Need for alteration of the Premises
5. Nature of Occupancy (office, factory, clinic, compete with LL, religion)

NOT Reasonable
Taste, convenience, or to charger higher rent

Policy why ONLY Commercial
Longer leases
Greater value
Too much litigation for Residential
Term
Tenants Duties
Definition
-Duty to pay rent so long at he is in possession.
-Refer to leasehold estates for duties in regard to termination
Term
LL's duties
Definition
1. Delivery
2. Implied Covenant of Quiet Enjoyment
3. Implied warrant of Habitability (residential only)
Term
Delivery/ejection
Definition
English: LL has duty to place T in both actual physical and legal possession of the premises at the start of the lease.
-remedy: T's remedy is against the LL
Policy: LL in better position to take responsibility for holdover T
American Rule: LL is only obligated to deliver Legal right of possession (no obstacle or superior right of possession than Ts) to the premises and nothing more
-New tenant's responsibility to oust holdover T
-T is still obligated to pay rent
Policy: LL should not be responsible for a 3rd party's action; not LL's fault
Term
Implied Warranty of Habitability (ONLY residential leases)
Definition
CL: LL has no duty to maintain premises
Modern: Implied in every lease that LL will provide premises that are safe, clean, and fit for human habitation.

This covers latent and blatant defects to essential facilities. Those vital to use of the premises for residential purposes, not the amenities

T cannot assume the risk and the implied warrant cannot be waived.
Policy- unequal bargaining power, forced to waive. Can take cheaper price because of defects and then complain, no waiving IWH. Otherwise waive defects take advantage of lower income Ts
Term
Tenant's Remedies
Definition
1. Wrongful Eviction
2. Constructive Eviction
3. Retaliatory Eviction
4. Breach of Implied Covenant of Quiet Enjoyment
Term
Wrongful Eviction
Definition
LL had no right to possession or the means used to remove T were forceable.
(LL self-help defense)
Term
Breach of Implied Covenant of Quiet Enjoyment (commercial and residential) [CONSTRUCTIVE EVICTION]
Definition
Any act OR omission of the LL which renders the premises SUBSTANTIALLY unsuitable for the purpose for which they are leased OR which seriously interferes with the beneficial enjoyment of the premises.

-To PRESERVE the right to vacate/claim constructive eviction, the T MUST
1. Provide reasonable notice to the LL of the condition
2. i.e. w/ reasonable time for the LL to correct the condition
3. Vacate the premises within a reasonable time

--As long as T is still in possession, the MUST pay rent
Term
Breach of Implied Warrant of Habitability
Definition
1.To prove breach, look first to the local or municipal housing code
a. A substantial violation is prima facie evidence of breach
b. 1-2 minor violations not affecting health/safety are de minimis
c. LL will NOT be liable for defects caused by the T
2. Then, inquire into whether the defect has an impact on Ts health/safety

Remedies
1. T may vacate, stop paying rent, and possibly seek damages
2. T may stay in the premises and withhold rent
--If LL files an eviction action, T can raise this as a defense by showing (1) notice, (2) reasonable time to correct
--Downside, jury might not believe the T
3. T may notify the LL, and if LL fails to correct the defect, T may repair it and deduct the expense from future rent
--Downside, T must have the means to do this and could still lose in a suit for back rent

Damages:

1. Expectation Damages- K law, difference between value of premises as warranted and value as delivered
2. Discomfort and Annoyance Damages- Incidental/Consequential-CL associated with defects
3. Punitive Damages- Tort Law
personal ill will, insult or oppression, reckless or wanton disregard for rights
Term
Retaliatory Eviction
Definition
There is a rebuttable presumption that any eviction w/in a certain period of time after T complains is retaliatory i.e. 3-6mos usually
Term
Tort Liability
Definition
Gen rule: LL not liable unless there is the public use exception or common area exception.

Public use exception: Member of the Public is injured from negligence of LL when known use would use would be open to the public under the lease.

Common area exception: Where a T, family or guest injured bc of LL negligence regarding common area

Modern: The scope is more broad. Policy improve the quality of housing. Implied warranty of Habitability-punative damages are available
Term
LL remedies: Self-help
Definition
@ CL, LL may use self-help to retake the premises IF (1) the LL is legally entitled to possession i.e. T is a holdover or in breach, AND (2) the LL’s means of reentry are peaceful i.e. not in breach of the peace

Modern: LL must alway resort to judicial process

Applies to residential and commercial leases. Requires a Landlord/tenant relationship (example: Hotel can change key on tenant if they don't pay)

Note: Use of police is breach of police
Term
LL remedies: Summary Eviction/unlawful detainer
Definition
1. T fails to pay rent -> LL makes a written demand for payment

2. If T fails to pay w/in 3 days -> LL can initiate the UD action
3. Upon receipt of summons, T has 5 days to respond -> if not, LL can seek an immediately default judgment
4. Upon default, the court issues a writ of possession to the LL -> if T fails to move out, the LL can have the sheriff serve the writ, and physically remove T
Term
Duty to Mitigate damages
Definition
Traditional: LL does have to mitigate. LL can sue for all rent due

Policies:
a. T cannot impose a duty on the LL by his own doing
b. T has “purchased” an interest and is stuck with it
c. LL should not be forced into a relationship with a new T
d. LL should not be required to seek out new Ts “continually”
e. Invitation to vandalism and should not be encouraged by placing a duty of mitigation on the LL

Trend: LL does have duty to mitigate damages.

1. LL must make reasonable effort to re-let
2. LL has burden of proof
Evidence:
1. Show the property to prospective other Ts
2. Advertise

Rebut:
Show third party willing, able and ready to rent and LL refused.
Term
Surrender
Definition
If T surrenders (offer to terminate the lease) and the LL accepts the lease is terminated.
-LL has right to past due rent
-If LL does not respond, this equals no acceptance

-implied offer of surrender/acceptance look at the parties conduct.
Term
Broker's (agents) duties
Definition
1. Communicate that they can find a buyer at a better price (ready, willing, able)
2. Duty of loyalty to act for the principal’s benefit in all matters
3. Duty to follow the principal’s directions
4. Obligation to maximize sale price
5. Duty to report to the seller information that the buyer shares with the broker
Note: Difference between Listing broker and selling broker
Term
Buyer's options/representation
Definition
1. Buyer's broker- fiduciary duty to buyer NOT seller. Shows buyer properties. Shares commission.
2. Dual agent- duty to both buyer and seller. Requires full disclosure and each parties approval.
3. Disclosure requirements- Some states require disclosures to buyer that selling agent is strictly working for the seller. (Today is CA these are required)
4. Hire attorney
Term
Commission
Definition
Commission earned when broker delivers a buyer ready, willing, and able to pay. Commission still due even if transaction doesn't close, but it is usually not collected.
Average agent commission = 6% (Flexible, not set in stone)- listing agent generally cuts % to selling/buying agent in order to give them an incentive to buy/sell the place.
Term
Listing Contracts
Definition
1. Open Listing Agreement- Least protective for broker. seller retains right to sell herself, or even use a different listing broker, typically does not have set termination date, broker earns commission ONLY if the first to secure a ready, willing, and able buyer. (very uncommon)
2. Exclusive Agency Listing- Broker's prefer so they don't have to compete. Only the broker can sell this property for a set period of time, owner can avoid paying commission if she sells it herself first.
3. Exclusive Right to Sell Listing- most protective for the broker. (brokers prefer) Owner must pay broker if ANY buyer purchases during the duration of the listing term, no matter who finds the buyer. (most common)
Term
Role of the Attorney
Definition
1. Can bargain down commission
2. Encourage splitting of commissions
Majority: Listing broker and seller broker entitled to commission.
4. Incentives the role of each agent. (bring buyers around)
Majority: Listing broker and seller broker entitled to commission.
5. Advise buyer of the agency, let buyer know selling agent is working for seller.
6. can advise on the K
Term
Doctrine of Caveat Emptor
Definition
CL: Seller has NO duty to disclose to buyer (buyer beware)
Modified Caveat Emptor- seller has NO duty to disclose to buyer Except:
1. Fiduciary relationship
2. Seller has affirmatively taken actions to conceal defect
3. Seller gives false representations
Seller DOES have a right to remain silent even if the buyer asks questions.
4. Exception created by Stambovsky v. Ackley
1. Seller creates condition
2. Condition materially alters value
3. Reasonable buyer didn’t know of condition

Exception Rule- Where a condition which has been created BY THE SELLER materially impairs the value of the contract (house/land) and is within the seller’s knowledge or unlikely to be discovered by a prudent purchaser exercising due care, non-disclosure constitutes a basis for rescission.

NOW: S is no longer required to create the condition now as long as the seller knows of the conditions


Patent Defect- kind of defect a reasonable inspection should reveal
Latent Defect- kind of defect a reasonable inspection cannot reveal
Malfeasance- occurs when seller affirmatively misrepresents the home’s condition
Nonfeasance- occurs when seller is simply silent and does not disclose home’s condition

Modern Approach- seller KNOWS of conditions not required to create the condition. Duty to disclosure has come a long way from Caveat Emptor, duty will only get broader. Helps unsophisticated buyers.
Term
Implied Warranty of Workmanability
Definition
“Old” Rule: required privity of K, we know there is privity of K b/w B1 and Builder but no privity of K exists b/w B2 and Builder.
ii. New Rule: Privity of K is not required to sue a builder/contractor under an IWWLQ for latent defects, which manifest themselves w/in a reasonable time after purchase, economic loss is an available remedy. (Lempke v. Dagenais - garage was messed up ct. dropped old rule)
. Protect purchasers upon discovery of latent defects i.e. protect innocent buyers
ii. Contractors NOT relieved of liability b/c of the fortuity of the sale of property
iii. Latent defects are not reasonably discoverable; unjust to bar later suit
iv. Consumer protection – buyers are not fit to assess the work
v. Contractors already owed a duty to the original owner and an extension to a subsequent purchaser would not change the contractor’s basic obligation
vi. Imposing such a bar might encourage sham first sales
vii. Builders are in a better position to evaluate and guard against the financial risks posed by latent defects in their work
Term
Statute Of Frauds
Definition
SOF is an evidentiary requirement for a K. Generally a writing is required for any land transaction.
i. We need a “signed writing by the party against whom enforcement is sought.”
ii. Additionally, the writing must describe the property to be conveyed and must normally indicate the sales price.
iii. If the sales price isn’t listed, cts usually enforce the K anyway and come up w/ a reasonable price (usually FMV)
a. Exam: SOF should red flag when you have two parties w/ no agents working for them
Term
Exceptions to Statute of Frauds
Definition
1. Part Performance
2. Doctrine of Estoppel
3. Restatement 2nd K section 129 "part performance"
Term
Part Performance
Definition
Term
Doctrine of Estoppel
Definition
Term
Restatement 2nd K section 124 "Doctrine of Part Performance"
Definition
Term
Marketable Title
Definition
Implied, unless waived
Test of Marketable title:
1. Whether there is going to be a significant risk of litigation for the prospective new buyer (really whether the new buyer would have a difficult time reselling the property?
"Private restriction or incumbrance when there is no notice of private covenants or the property is in violation of the ordinance or covenants." Lohmeyer
Ordinances
-Ordinances are NOT un-merchantable. Mere ordinances affecting use of property is common because served to prevent nuisances.
Restrictions (Covenants) Without Notice
-Generally private land use restrictions without notice to the buyer render a title un-merchantable. However, freedom of K may override this. Can contract around this rule “subject to all restrictions and easements to the property” (See Lohmeyer v. Bower). Similar to saying “as is.” Responsibility of the buyer to check out the restrictions FIRST and then sign.
Adverse Possession
-An adverse possession claim would affect warranty of merchantable title because someone is taking you to court to challenge title (doesn’t pass test).
Violations
-Violations of covenants or zoning ordinances make the title un-merchantable
Hazardous waste
-hazardous does not make title unmarketable
Term
Doctrine of Equitable Conversion
Definition
Buyer bears the risk of costs once the K has been executed. Buyer retains EQUITABLE TITLE while seller retains LEGAL TITLE until closing. Property doesn’t legally change hands until closing, after K of sale. Hold in equity title passes from seller to buy at K of sale, not closing, so buyer owns in equity and bears the risk during that period.
Exception- If it was seller’s fault, seller will most likely be responsible.
Term
Doctrine of Caveat Emptor-
Definition
Minority: Seller has NO duty to disclose to buyer (buyer beware)
Except:
1. Fiduciary relationship
2. Seller has affirmatively taken actions to conceal defect
3. Seller gives false representations
Term
Hazardous Waste
Definition
Term
7 ways to terminate a covenant
Definition
1. C- Changed conditions
2. A- Abandonment
3. M-merger (of the land)
4. P- prescription
5. E- eminent domain
6. N- Natural Experation
Term
General Warranty
Definition
• seller makes a general warranty against defects about the title and that covers any made by the seller or not
Term
Special Warranty Deed
Definition
• warrants the title against defects cause by the seller, but NOT against other defect.
• Difference of Special and General:
• General protects the buyer against defect in title caused by AP claim against title that proceeded the seller’s ownership of title.
• Special would not protect against any defect in title that proceeded the seller’s ownership of title; ONLY from when the seller held title
Term
Quit Claim Deed
Definition
• Provides no warranty as to title whatsoever
• If buyer takes QCD, buyer is not protected against ANY defects in title
• Buyer might take this when he doesn’t know what he’s buying
• OR is just willing to deal with any defects. If they know about the AP claim and they don’t care and will deal with it.
Term
Voidable Title
Definition
o Talked about this with Chattels
o In property, someone who acquires a deed fraudulently can convey to a good faith purchaser good title to the land
• The fraudulent purchaser will be liable for damage to whom he defrauded, but the good faith purchaser would take good title to the land.
Term
Financing Property
Definition
• When people buy real property (residential or commercial), they typically finance by putting part of the purchase price down and borrowing the rest from a bank or other lender
• Bank will require the buyer/borrower execute a promissory note
o Instrument that evidences the buyer/borrower to repay the loan
o The bank wants some security for the loan
• They want a mortgage in the real property as security for the buyers repayment of the loan.
o The buyer executes a promissory note and mortgage agreement
• Grants to the bank a mortgage interest in the property
• Mortgage interest is a property interest (most treat as lien)
Term
Mortgage
Definition
• The buyer is the mortgager
• Bank is mortgagee
• If the buyer defaults, the bank has the legal right to foreclose on the property
o The purpose of foreclosing is so the bank can take possession of the property and auction it off so the proceeds can be used to pay off buyer's unpaid loan obligation.
• When we say mortgage today we mean the mortgage and the loan.
• The positives
o The bank and buyer both want the bank to have a mortgage in the house
• Inherent Problem in the Bank holding the mortgage
o Suppose the buyer defaults and the bank can exercise their right to foreclose, then the bank auctions the house off and the borrower’s brother buys the house for $1
Term
Foreclosures/Auctions
Definition
o The bank/lender is a fiduciary of sorts
o The bank/lender is NOT obligated to get the highest price possible at the auction.
o The duty on the lender is not that high of a duty
o BUT the lender has to make some effort to get an adequate price
o It is not enough to prove bad faith if the lender got an inadequate price
• Bad faith requires wanton or willful disregard or intent to do injury
o Lender's Fiduciary Obligation requires they use some due diligence
o Due Diligence = “reasonable man" in the lenders place would have adjourned the sale.
• Commercial reasonableness standard
• Inquires to whether the sale was conducted in the usual manner for a property of that type
Term
Damages for Breach Lender's Fiduciary Obligation
Definition
1. Bad Faith Breach= Fair Market Value

2. Breaching Fiduciary obligation in Due Diligence= "Fair" price as opposed to FMV
--• Fair price = the price you could get at the auction if the lender had used due diligence and the auction had been conducted in a usual or reasonable commercial manner
---o This is bc you usually have a different type of buyers at these auctions.
-----• Normal buyers don’t have the same information.
-----• Don’t know how to flip
• The buyers are usually people who buy at auctions and refurbish the houses and re-sell them.
3. Court can grant injunctions and they will have to:
• ex: Give advance notice to attorney general of foreclosure properties
Term
Presumption of Unfairness
Definition
1-4 (asking Smythe)
Term
Prime Mortgage
Definition
• One that meets certain financial requirements that reduce the riskiness of the loan.
• 1. Usually min credit score
• 2. Maximum debt to equity ratio (LTV)
• 3. Min Income
• Less risky bc the borrower is more likely to pay it off.
Term
Sub-Prime Mortgage
Definition
Banks/lender are making a lot of subprime mortgages. Do not meet the factors stated above.
o Debt on loan was the entire amount of the purchase price, bad credit scores
• They would make an original loan and then a “piggy back” loan → essentially the full amount was a loan.
• The loans were made with adjustable rate mortgages: mortgage with an interest rate that can be adjusted after a certain period (typically, 3 years), but has a teaser interest rate. Adjusted would be done according to market forces, sometimes upwards.
 Difficult for borrower to carry the payment.
Term
Summary Judgment
FRCP 56
Definition
Sum. Jud. Is a motion that can be made by either the claimant (typically the P) OR the defending party for an immediate judgment on the merits without a trial.
• Governed by FRCP 56 and will be granted if two elements are met (KNOW THESE TWO ELEMENTS):
o 1. “the there is no genuine issue as to any material fact;” and
o 2. “that the moving party is entitled to a judgment as a matter of law.” Rule 56(C)
• Other particulars concerning sum jud that are specified in R 56(d):
o Sum jud “may be rendered on the issue of liability alone, even if there is a genuine issue on the amount of damages.” R 56(d)
• (d)(1)Generally, even in full sum jt is not ordered in a case, the court may ascertain at the summary judgment hearing which “material facts are not genuinely at issue.” R
o (d)(2). A later factual proceeding will determine damages.
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