Free LA-Notary Mortgages and Security Devices Questions and Answers — Questions and Answers
Question 1: A mortgage is best defined as a:
- Transfer of ownership of a property to a creditor as security for a debt.
- Nonpossessory right created over property to secure the performance of an obligation. (Correct answer)
- Personal promise to repay a loan, evidenced by a promissory note.
- Court order seizing property to satisfy a judgment.
Correct answer: Nonpossessory right created over property to secure the performance of an obligation.
A mortgage is a real right over property that secures a debt. The debtor retains ownership and possession of the property, but the creditor has the right to have the property seized and sold if the debtor defaults on the obligation.
Question 2: A mortgage established by a written agreement between a debtor and a creditor is known as a:
- Legal mortgage
- Judicial mortgage
- Conventional mortgage (Correct answer)
- Tacit mortgage
Correct answer: Conventional mortgage
A conventional mortgage is created by contract between the parties. A legal mortgage is created by operation of law (e.g., in favor of a minor over the property of a tutor), and a judicial mortgage results from the filing of a money judgment.
Question 3: To maintain its effectiveness against third parties, a mortgage inscription must generally be reinscribed within what period of time from the date of the act?
- 5 years
- 10 years (Correct answer)
- 20 years
- 30 years
Correct answer: 10 years
The effect of recordation of a mortgage ceases ten years after the date of the act of mortgage. To continue its effect against third parties, the mortgage must be reinscribed by filing a notice of reinscription before the ten-year period lapses.
Question 4: A clause in a mortgage that allows the mortgagee to foreclose on the property without making a subsequent owner a party to the lawsuit is called:
- A due-on-sale clause
- A confession of judgment
- A pact de non alienando (Correct answer)
- An in rem clause
Correct answer: A pact de non alienando
A pact de non alienando is a contractual agreement by which the mortgagor agrees not to sell or encumber the mortgaged property to the prejudice of the mortgagee. This allows the mortgagee to proceed with foreclosure via executory process directly against the original mortgagor, even if the property has been sold to a third party.
Question 5: For a creditor to use executory process to foreclose on a mortgage, the act of mortgage must contain which of the following?
- The signature of two witnesses and a notary.
- A waiver of the homestead exemption.
- A confession of judgment. (Correct answer)
- A description of the property by municipal address only.
Correct answer: A confession of judgment.
Executory process is an accelerated foreclosure procedure. To use it, the creditor must have an act of mortgage in authentic form that contains a confession of judgment, which is the debtor's pre-emptive agreement to the entry of a judgment against them if they default.
Question 6: Bank A records a mortgage on a property on June 1st. Bank B records a mortgage on the same property on June 15th. If the property is sold at a foreclosure sale, which bank has priority for payment from the proceeds?
- Bank A, because its mortgage was recorded first. (Correct answer)
- Bank B, because its mortgage is more recent.
- They share the proceeds proportionally.
- The bank with the larger loan amount has priority.
Correct answer: Bank A, because its mortgage was recorded first.
In Louisiana, the ranking or priority of mortgages is generally determined by the order in which they are recorded in the public records. Because Bank A's mortgage was recorded before Bank B's, it has first priority and will be paid in full from the sale proceeds before Bank B receives any payment.
Question 7: A person sells an immovable property to a buyer on credit, but the act of sale does not explicitly create a mortgage. What security device automatically arises in favor of the seller to secure the unpaid portion of the purchase price?
- A judicial mortgage
- A chattel mortgage
- A vendor's privilege (Correct answer)
- A right of redemption
Correct answer: A vendor's privilege
The vendor's privilege, or seller's lien, is a privilege granted by law on movable or immovable property to secure the unpaid purchase price. For it to be effective on an immovable against third parties, the act of sale must be recorded and must state the amount of the unpaid price.
Free LA-Notary Mortgages and Security Devices Questions and Answers
A mortgage is best defined as a: