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The Legal Aspects of Real Estate Finance

The Legal Aspects of Real Estate Finance

The Uniform Commercial Code is a uniform law, which exists in every state, set to help maintain control over all commercial transactions and sales, such as loans and mortgages. The UCC has been revised since its introduction to better suit the demands and needs of the borrowers and lenders involved in a deal such as a loan. 
A UCC allows for a loan to be secured with personal property through filing a statement and filling out a security agreement by the borrower. This includes, not only the personal property, but also its fixtures. Under the UCC, some examples of the transactions dealt with include the following: fund transfers, documents of title, investment securities, negotiable instruments, leases, secured transactions, sales, letters of credit, bank deposits, bulk sales, mortgages, loans, etc. 
Each area or article of the code deals with one of these specific transactions in stating what types of rules and regulations they must abide by. The code assists in unifying the transactions in states in order to prevent any confusion or interruption to them. For example, in dealing with sales of a product, it may be produced, packaged, and sold in many different states.
This may have presented a great deal of issues if there wasn’t a single code followed by all those states to ease the transaction altogether. However, due to the fact that all these processes would follow the UCC, such problems may be prevented. The way a UCC is made up is by being written into a draft document through groups of people with an expertise in commercial law. The draft then needs to be approved by the American Law Institute and the Uniform Law Commissioners. 
These organizations must review the drafts first, and decide whether any changes need to be made, or if the draft is ready to be endorsed for adoption by the states. This is when the code goes into effect, and the states must adopt it into their existing code. In real estate, the UCC requires a financing statement to be filed in relation to a debt. This statement contains vital information in regards to the debt and the debtor as well as any property involved.
The information included would be the names of both parties ( the debtor and lender) as well as their domiciles as well as a full and clear description of both the personal and real property (as well as the location). These details can help to clearly identify all the persons and items involved in the securing of a loan with personal property. 
The UCC is seen by many as one of the greatest universal laws accepted as it is a model code extensively adopted by states. With the UCC being applied into the commercial dealings by the states, the transactions have and will continue to progress with great ease. These include any transitional issues with commercial transactions that cross state borders and regulations. 

The Legal Aspects of Real Estate Finance

The Legal Aspects of Real Estate  Finance

Promissory Note
Promissory notes are legal documents declaring a promise by one person to pay a debt owed to another person. The writer of the note is known as the maker, and states their promise to pay off a specified amount of money to the payee. In some cases, the maker may be referred to as the promisor, and the payee or lender as the promisee. In this note, the amount will be discussed as well as both full names for the maker and the payee. A promissory note contains the amount of time the person has to pay the debt off, and can specify the number and frequency of payments involved in eliminating the debt. A promissory note may be transferred by the lender in a sale. The person receiving the note in such a sale or transfer is known as a holder.
Guaranty
A guaranty refers to an agreement that is signed by party or parties that entails that they accept responsibility of a payment over a debt. This agreement is a type of added assurance to a lender in regards to being repaid for the money that was loaned to a borrower. The guaranty imposes a guarantee that the money will be paid to the lender by the person signing it, in the case that the borrower is unable to, or lacks the funds to do so. It is similar to a form of “vouching” for the borrower. This puts a lender to ease, and usually makes it easier for a borrower to acquire a loan, giving more credibility to their ability to return the funds to the lender. In this case, the lender would know that, if for any reason, the person wasn’t able to make a payment or payments, they have a backup source that has fully accepted the duty of doing.
Legal Requirements
There are certain legal requirements that documents must meet in real estate in direct relation to their entitlements. The documents discussed deal with mortgages, deeds of trust, and security deeds. Mortgages must have written into them the following: the name of the mortgagor and mortgagee and any further parties involved, a statement of given ownership or transfer of the property, and a description of the property. Following these items, the mortgage must be signed and authenticated and, furthermore, be delivered to the lender. Deeds of trust deal with the transfer of a title over a property to a third party that holds onto it until a debt is paid off. This document is a security over the debt using the property as collateral. The holder of the title is referred to as the trustee, and has the power to sell the land if the debtor fails to pay their debt as specified. The trustee can provide the earnings of a sale to the lender in order to repay the debt. A security deed is very similar to a deed of trust. They only differ in the fact that, with a security deed, the lender holds onto a title rather than a trustee. This eliminates the third party, and places the dealings with the sale of a property between the lender and borrower directly.
Mortgage Defaults
Mortgage defaults deal with a mortgage that has not been paid for in a certain period of time. Once this period of time passes, the mortgage is said to be in default. This can seriously impact a person’s credit report and score instantly as well as negatively. Furthermore, a defaulted mortgage can result in a loss of property due to an order of foreclosure and sale of the property in foreclosure. A borrower is given what is thought to be a sufficient amount of time to take care of payments owed and bring back the mortgage to good standing prior to it being foreclosed. This comes by way of a grace period on the original payment date, as well as a certain number of days/weeks after, prior to its being placed into default. Both the lender and the borrower are protected by laws and regulations that prevent wrongdoing when dealing with a mortgage in all aspects of it. These rules help to maintain stability in the process of applying for, approving, and dealing with an unpaid mortgage. 

Uniform Commercial Code

The UCC or Uniform Commercial Code relates to a set of codes that exists to maintain control over any commercial transactions performed. This code is uniformly adopted by all states after it has been approved by the Uniform Law Commissioners and the American Law Institute. There are a series of steps for approval of such code by way of a set of drafts and revisions (if necessary) prior to the states being delegated to the adoption of these measures. The UCC is said to be one of the greatest instruments in commercial law due to the fact that it has become a model code for all states and so widely adopted. This set of codes has helped alleviate issues with commercial transactions, and has made for much smoother ones. New adjustments are made to the code in compliance with changes to assure an updated relevance of the code to today’s business world.