LA Notary Mortgages and Security Devices 2 — Questions and Answers
Question 1: Under Louisiana law, what is a conventional mortgage?
- A mortgage created by court order
- A mortgage created by agreement between the mortgagor and mortgagee to secure a debt (Correct answer)
- A mortgage imposed by operation of law
- A mortgage created by government regulation
Correct answer: A mortgage created by agreement between the mortgagor and mortgagee to secure a debt
A conventional mortgage is created by contract between the parties.
Louisiana Civil Code Article 3287 provides that a conventional mortgage is established by contract. It must be established by authentic act or act under private signature duly acknowledged.
Question 2: What is the effect of recording a mortgage in the parish mortgage records in Louisiana?
- It has no legal effect
- It provides notice to third parties and establishes the mortgage's ranking priority among creditors (Correct answer)
- It automatically forecloses the property
- It transfers ownership to the creditor
Correct answer: It provides notice to third parties and establishes the mortgage's ranking priority among creditors
Recording gives the mortgage effect against third parties and establishes priority.
Louisiana Civil Code Article 3307 establishes that a mortgage is effective against third parties from the time it is filed. An unrecorded mortgage may be valid between the parties but not against third parties.
Question 3: Under Louisiana law, what is a legal mortgage?
- A mortgage created by contract
- A mortgage that arises by operation of law without a contract, such as a vendor's lien or a tax lien (Correct answer)
- A mortgage approved by an attorney
- A mortgage insured by the government
Correct answer: A mortgage that arises by operation of law without a contract, such as a vendor's lien or a tax lien
Legal mortgages arise automatically by operation of law in certain situations.
Louisiana Civil Code Article 3301 provides that a legal mortgage is established by operation of law. Examples include the vendor's privilege on immovable property and the contractor's privilege.
Question 4: What is a collateral mortgage in Louisiana?
- A second mortgage on the same property
- A mortgage package consisting of a mortgage note, a collateral mortgage act, and a hand note, used to secure present and future indebtedness (Correct answer)
- A mortgage on personal property only
- A shared mortgage between two property owners
Correct answer: A mortgage package consisting of a mortgage note, a collateral mortgage act, and a hand note, used to secure present and future indebtedness
A collateral mortgage is a unique Louisiana device using a mortgage note pledged as security for a hand note.
The collateral mortgage consists of a collateral mortgage act, a mortgage note paraphed ne varietur, and a hand note evidencing the actual debt. The 2012 revisions made them less common.
Question 5: Under Louisiana law, how long does a mortgage inscription remain effective in the public records?
- Indefinitely until released
- Generally ten years from the date of the mortgage act, subject to reinscription (Correct answer)
- Five years
- Until the underlying debt is paid
Correct answer: Generally ten years from the date of the mortgage act, subject to reinscription
A mortgage inscription is generally effective for ten years and must be reinscribed to maintain effectiveness.
Louisiana Civil Code Article 3357 provides that inscription ceases ten years after the date of the mortgage act unless reinscribed. Failure to reinscribe causes loss of effect against third parties.
Question 6: What is a privilege in Louisiana security device law?
- A special right enjoyed by wealthy individuals
- A right of preference given by law to certain creditors to be paid before other creditors (Correct answer)
- An exemption from taxation
- A type of insurance policy
Correct answer: A right of preference given by law to certain creditors to be paid before other creditors
A privilege is a statutory right giving certain creditors priority in payment over other creditors.
Louisiana Civil Code Article 3186 defines a privilege as a right that the law grants to a creditor to be preferred over other creditors based on the nature of the claim. Privileges may be general or special.
LA Notary Mortgages and Security Devices 2
Under Louisiana law, what is a conventional mortgage?