Crucial Exams

Multistate Bar Examination Practice Question

A borrower gives a mortgage on her commercial building to a bank to secure repayment of a loan. The mortgage instrument contains the following clause:

"If the borrower defaults, she hereby waives any and all rights to redeem the mortgaged property, and title shall immediately vest in the bank without the need for foreclosure."

After the borrower defaults, the bank seeks to rely on the clause and record its title to the building without bringing a foreclosure action. Which of the following best states the legal effect of the clause?

  • The clause is enforceable only if the loan's interest rate does not violate the jurisdiction's usury laws.

  • The clause is enforceable because parties are free to waive equitable rights by contract.

  • The clause is unenforceable because it constitutes an impermissible clog on the borrower's equity of redemption; the bank must foreclose before it can obtain title.

  • The clause is unenforceable only if the mortgage is recorded after the borrower's default.

Multistate Bar Examination
Real Property
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