SELLER FINANCING INSTRUMENTS

TITLE: 

  •  With Mortgages and Deeds of Trust, equitable and legal title is immediately transferred to the buyer at closing, meaning the buyer receives a deed of some sort. The parties enter into a Promissory Note  and the Mortgage or Deed of Trust serves as a security lien against the property for repayment of the Note. 

  • With an REC, equitable interest in the property is immediately transferred to the buyer, but legal title to the property remains with the seller until such time as the buyer has fulfilled all terms of the REC. This means the buyer does not get a deed until they have “paid-off” the REC. With this said, New Mexico courts have consistently held that the buyer under an REC is the “owner” of the land and the seller is regarded as the “owner” only of the right to receive payment for the property. Therefore, the buyer’s interest under a REC is “real property” and the seller’s  interest is personal property. 

 

FORECLOSURE PROCESS:

  • Mortgages can only be foreclosed through a judicial process (a process initiated and adjudicated through the courts). This process is dictated by statute (law).  This can be a lengthy and expensive process.

  • Deeds of Trust may be judicially foreclosed or foreclosed through a non-judicial process involving a trustee who has been given authority to sell the property if the buyer defaults; this is called a trustee's sale. This process may be less time consuming and expensive than the Mortgage foreclosure process, but still typically longer and more expensive than the forfeiture process under an REC. By law, Deeds of Trust involving a "home loan" must be judicially foreclosed. A “home loan” is defined as a loan where the principal amount does not exceed the conforming loan size limit for a single-family dwelling as established by the federal national mortgage association (as of June 2022, this amount is $647,2000) and where the loan is secured by: 

    • a Mortgage or Deed of Trust on real estate within New Mexico upon which there is located or there is to be located a structure: 

    • designed principally for occupancy by one to four families; and 

    • that is or will be occupied by a borrower as the borrower's principal residence or a security interest on a manufactured home that is or will be occupied by borrower as the borrower's principal residence.

  • RECs may be non-judicially foreclosed through a formal default process that is detailed in the REC, and includes an Affidavit of Default, typically drafted by an attorney. The REC forfeiture process is generally much faster and less expensive. For more on this, see  “Default under an REC” under the Info Tab.