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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

Montana

Both mortgages and trust indentures are in common use in Montana, the latter being governed by the Montana Small Tract Financing Act (the “Act”) and limited to parcels that do not exceed 40 acres. See Montana Code Annotated &sect;&sect;&nbsp;71-1-301, 321. The Act describes the minimal content required for a trust indenture and describes the non-judicial foreclosure procedure available for its enforcement. The trust indenture is deemed a mortgage as well and is subject to all laws relating to mortgages except where inconsistent with the Act. Mont. Code Ann. &sect;&nbsp;71-1-305. The trustee's power of sale under a trust indenture need not be set out in the instrument but is conferred by the Act. Mont. Code Ann. &sect;&nbsp;71-1-304. A power of sale may also be granted to the mortgagee in a mortgage with the right to foreclose non-judicially, but this remedy is not generally used because the mortgagee may not be a purchaser at a sale conducted under a power of sale. Mont. Code Ann. &sect;&nbsp;71-1-223.

SECURITY INSTRUMENT(S) USED

To provide notice of the mortgage to third parties, a mortgage or trust indenture and any assignments must be recorded in the real estate records of the county where the real property collateral is located. Mont. Code Ann. &sect;&sect;&nbsp;70-21-202, 208. A mortgage or trust indenture may be recorded if it contains a recordable legal description, is signed by the mortgagor or grantor whose signature is acknowledged before a notary public, and contains the mortgagee's or beneficiary's mailing address. Standards for recorded documents are set forth in Section 7-4-2636 of the Montana Code Annotated, addressing such matters as paper size and weight, margin size, the listing of the name and address of the party to whom the document is to be returned after recording, and the color of ink to be used. Documents may be recorded without compliance with this statute, but the recording fee is increased. Mont. Code Ann. &sect;&nbsp;7-4-2637.

RECORDING REQUIREMENTS

To waive homestead protection, the trust indenture or mortgage must be signed by both spouses, even though one or the other may not own the property. There is a separate right of a judgment debtor following judicial foreclosure of a mortgage, where the collateral is used as a home for the judgment debtor's family, to retain possession during the period of redemption. Any purported waiver of that right in a mortgage is void, as are like waivers of the right of redemption that may exist. See Mont. Code Ann. &sect;&nbsp;71-1-229. The purchaser at a non-judicial foreclosure under the Act is entitled to possession of the property 10 days after the sale. Mont. Code Ann. &sect;&nbsp;71-1-319. If the party in possession holds over beyond 10 days, the Act confers on the holdover occupant the status of a tenant at will. Id. In order to enforce the right of possession through an action in unlawful detainer, the purchaser must first terminate the “tenancy at will” arising under the Act by giving at least 1 month's written notice. Mont. Code Ann. &sect;&nbsp;70-27-104. Language in the trust indenture acknowledging the sale purchaser's right to possession 10 days following the sale has been held to constitute a waiver of the creation of the tenancy at will otherwise conferred by the Act upon a holdover occupant.

STATUTES TO BE WAIVED

Reserves for payment of property taxes, insurance premiums, etc., may not exceed 110% of the reasonable amount needed to pay such expenses unless there is a written contract agreeing to a larger reserve. Mont. Code Ann. &sect;&nbsp;71-1-113, 114. The lender is required to keep an itemized record of each payment made into the reserve account and each disbursement from the reserve account and to annually mail a statement of total receipts and disbursements to the borrower under a mortgage or trust indenture of real property. Mont. Code Ann. &sect;&nbsp;71-1-115.

UNUSUAL TREATMENT OF STANDARD PROVISIONS

The amount of future advances or total indebtedness that may be outstanding at any time and subject to mortgage protection must be stated in the mortgage. Mont. Code Ann. &sect;&nbsp;71-1-206(1). The mortgagee may reserve the right to refuse to make all or any part of a future advance. Id. The mortgagor may relinquish the right to apply for future advances by written notice, duly acknowledged, delivered to the mortgagee, and by recording the notice, the mortgagor may reduce the amount of debt secured by the mortgage. Mont. Code Ann. &sect;&nbsp;71-1-206(3). The mortgagor retains the right to demand satisfaction of the mortgage any time the balance due on the obligation is zero. Id.

SECURING FUTURE ADVANCES

It is customary to insert in a mortgage or trust indenture a provision to secure the lender's advances to protect the collateral against claims to avoid any question of the right of a mortgagee in equity to that protection where written authorization is lacking.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL

A trustee must be either: (1)&nbsp;an attorney licensed to practice law in Montana, (2)&nbsp;a bank, trust company, or savings and loan association authorized to do business in Montana under the laws of Montana or the United States, or (3)&nbsp;a title insurer or title insurance producer or agency authorized to do business in Montana. Mont. Code Ann. &sect;&nbsp;71-1-306.

CORPORATE OR INDIVIDUAL

RESIDENCY REQUIRED

Non-judicial foreclosure of a trust indenture under the Act requires recording of a written notice of sale in the real estate records where the property is located at least 120 days before the sale date. Mont. Code Ann. &sect;&nbsp;71-1-313(3). The sale notice is also mailed at least 120 days before the sale date to all interested parties, including the grantor, posted at least 20 days before the sale date in a conspicuous place on the property foreclosed, and published in a newspaper of general circulation in the county once a week for 3 successive weeks with the last publication at least 20 days before the scheduled sale. Mont. Code Ann. &sect;&nbsp;71-1-315(1)(a)-(c). The trustee may postpone the sale by public proclamation at the time and place originally scheduled for 15 days or for as long as 120 days (in 30-day increments) where bankruptcy is filed during the notice period. Mont. Code Ann. &sect;&nbsp;71-1-315(3). The borrower may terminate the non-judicial foreclosure at any time prior to sale by tendering all of the back payments and foreclosure expenses irrespective of any trust indenture provision accelerating the debt on default. Mont. Code Ann. &sect;&nbsp;71-1-312(1). Judicial foreclosure is an action to enforce the obligation secured with a request for the equitable remedy of foreclosure of the collateral. Montana has a “one form of action statute,” which generally requires that the holder of an obligation secured by a real estate mortgage must seek enforcement by foreclosure unless the collateral has become valueless. Mont. Code Ann. &sect;&nbsp;71-1-222. However, this statute was amended dramatically in 1999 by inserting a list of actions that may be taken by the holder of such an obligation without running afoul of this obligation to seek judicial foreclosure. These exceptions generally involve actions outside of Montana and non-judicial enforcement efforts regarding personal property where the obligation held is secured by mixed collateral.

BRIEF DESCRIPTION OF PROCEDURE

A non-judicial foreclosure under the Act typically may be concluded in 6 months. A judicial foreclosure judgment by default theoretically can be obtained in 60 days where service of process can be accomplished promptly and without publication, although it typically takes approximately 6 months from commencement of judicial foreclosure to foreclosure sale in an uncontested judicial foreclosure.

TYPICAL LENGTH OF PROCEDURE

Terms of foreclosure sales, both judicial and non-judicial, are cash except that the bid of the judgment creditor or trust indenture beneficiary by exchange of credit is accepted.

FORECLOSURE BID REQUIREMENTS

There is no redemption following non-judicial foreclosure under the Act and the purchaser is entitled to possession 10 days following the sale. Mont. Code Ann. &sect;&nbsp;71-1-319. This 10-day delay of possession may be waived by the borrower in the trust indenture. Enforcement of the right to possession following non-judicial foreclosure may require an action in unlawful detainer. Following judicial foreclosure, the judgment debtor and creditors holding liens subordinate to the lien foreclosed have a right to redeem the property within 1 year from the sale. Mont Code Ann. &sect;&nbsp;25-13-802.

REDEMPTION PERIOD AND PRICE

Redemption by the judgment debtor terminates the redemption period. Mont. Code Ann. &sect;&nbsp;25-13-809. Redemption by a lien creditor shortens the period for redemption by other lienholders to 60 days from the last redemption. Mont Code Ann. &sect;&nbsp;25-13-803. An advance waiver of a mortgagor's right of redemption in a mortgage is not enforceable, but the right of redemption after foreclosure sale may be conveyed by deed.

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

No deficiency can be recovered following non-judicial foreclosure of a trust indenture under the Act irrespective of the nature of the use of the property. Mont. Code Ann. &sect;&nbsp;71-1-317. A deficiency may be recovered following judicial foreclosure except in the case of a purchase money mortgage or the judicial foreclosure of a trust indenture on debtor-occupied single-family residential property. Mont. Code Ann. &sect;&nbsp;71-1-232. In the case of a trust indenture on commercial property that is foreclosed judicially, the deficiency is limited to the difference between the debt amount and the fair market value of the property at the time of sheriff's sale, which is the intrinsic value of the property without consideration of the impact of foreclosure, as determined by the court. The deficiency is established by a judgment docketed upon conclusion of the foreclosure sale, the enforcement of which is governed by the general rules applicable to judgments, which generally make a judgment a lien for 10 years. In judicial foreclosure, a fair market value determination may be required in order to sustain a deficiency judgment where the issue is raised by the borrower at trial, although there is no statutory requirement or procedure expressly established for such determination.

DEFICIENCIES

A leasehold estate may be foreclosed if proper steps for joinder in judicial foreclosure or notice in non-judicial foreclosure are taken.

EFFECT OF FORECLOSURE UPON LEASES

There have been no significant changes to the foreclosure process in Montana as a result of recent litigation.

FORECLOSURE LITIGATION

Montana's general usury statute provides that the maximum permissible interest rate in Montana to which parties may agree by written contract is the greater of 15% or 6 percentage points per annum above the prime rate published by the federal reserve system in its statistical release H.15 Selected Interest Rates for bank prime loans dated 3 business days prior to the execution of the written contract. Mont. Code Ann. &sect;&nbsp;31-1-107.

USURY CEILING

There is an exemption to the general usury statute for regulated lenders (generally entities organized pursuant to state or federal authority and subject to state or federal regulation). Mont. Code Ann. &sect;&nbsp;31-1-112. Limitations on charges exist for licensees under the Montana Consumer Loan Act. Mont. Code Ann. &sect;&nbsp;32-5-101 et seq. The Montana Deferred Deposit Loan Act provides exemptions for deferred deposit lenders. Mont. Code Ann. &sect;&nbsp;31-1-701. Pawn brokers are also subject to usury exceptions. Mont. Code Ann. &sect;&nbsp;31-1-401.

USURY EXEMPTIONS

Financing statements under the Uniform Commercial Code are generally filed in the office of the Secretary of State except in cases where the collateral is timber to be cut, minerals, and related accounts or where the financing statement is filed as a fixture filing and the collateral is goods that are or are to become fixtures. Mont. Code Ann. &sect;&nbsp;30-9A-501. In these latter cases the proper place of filing is where a mortgage on the real property would be recorded.

LOCATIONS FOR FILING

A mortgage (or trust indenture) is effective as a financing statement filed as a fixture filing if the goods are described in the mortgage by item or type, and the goods are or are to become fixtures related to real estate described in the mortgage. Mont. Code Ann. &sect;&nbsp;30-9A-502. The mortgage must state the debtor's name and mailing address, and if the debtor is an entity, must state the type of organization the jurisdiction of the organization. Mont. Code Ann. &sect;&nbsp;309A503. The mortgage must include the secured party's name and mailing address, and must be duly recorded in the real estate records in the county where the property is located. Mont. Code Ann. &sect;&nbsp;30-9A-502.

SECURITY INSTRUMENT AS FIXTURE FILING

Extensive amendments to Article&nbsp;9 of the Montana UCC were adopted effective July&nbsp;1, 2001. In 2013 Montana adopted most of the 2010 Amendments to Article 9 of the Uniform Commercial Code. Montana's revisions included the&nbsp;adoption of the Alternative A “only if” approach for individual debtor name sufficiency and incorporated the safe harbor forms from the official text of the 2010 Amendments. Montana has 1 slightly non-uniform provision for individual name sufficiency. The source of the individual debtor name can be an unexpired driver's license, state identification card, or tribal identification card.

AMENDMENT OF ARTICLE 9 OF THE MONTANA UNIFORM COMMERCIAL CODE

There are no unusual provisions or requirements respecting contracts of guaranty in Montana.

UNUSUAL PROVISIONS AND REQUIREMENTS

Guaranty agreements customarily contain language making them absolute, continuing, unconditional, personal, and irrevocable, and include waivers of any potential exoneration of the guarantor's obligation as a result of the guaranteed party's failure to fulfill conditions precedent to the principal's guaranteed obligation or failure to exercise diligence in collection or to resort to available collateral. It is recommended that guarantor's consent to amendment of the underlying obligation be obtained even if such consent is waived in the guaranty. Mont. Code Ann. &sect; 28-11-211.

None, other than enforcement is generally vigorously contested.

SPECIAL PROBLEMS IN ENFORCEMENT OF GUARANTY

A deficiency judgment may not be obtained against the guarantor of an obligation secured by a trust indenture executed in conformity with the provisions of the Montana Small Tract Financing Act and foreclosed by advertisement and sale. Mont. Code Ann. &sect;&nbsp;71-1-317.

ISSUES AND GUIDELINES RELATED TO SEEKING/OBTAINING DEFICIENCY JUDGMENTS

A mortgage is valid from the time recorded until 8 years after the secured obligation's maturity unless the mortgagee files an affidavit of renewal, which may extend the mortgage for an additional 8 years. Mont. Code Ann. &sect;&nbsp;71-1-210 and &sect;&nbsp;71-1-311. Modification of a mortgage or trust indenture to include a new maturity date will also extend the statute of limitations for a new 8-year period. See also Modification under the general topic “GENERAL.”

STATUTE OF LIMITATION PERIOD

A release or satisfaction of mortgage must be signed by the mortgagee or its authorized representative within 90 days after a release or satisfaction of mortgage is requested. The release or satisfaction of mortgage must be recorded in the real estate records where the mortgage is recorded. A trust indenture is released or satisfied by trustee's recorded reconveyance of the property encumbered, which must be provided upon written request of the beneficiary. Failure of a mortgagee or trust indenture beneficiary or trustee to provide satisfaction is subject to a penalty of $500 together with actual damages. Mont. Code Ann. &sect;&nbsp;711212 and &sect;&nbsp;71-1-307.

REQUIREMENTS FOR RELEASE OF LIEN

The homestead exemption amount is $250,000. Mont. Code Ann. &sect;&nbsp;70-32-104. See also Statutes to Be Waived under the general topic “FORM.”

HOMESTEAD ISSUES

Montana is not a community property state.

COMMUNITY PROPERTY

MORTGAGE TAX, DOCUMENTARY STAMP TAX AND TRANSFER TAX

The creation, perfection, and enforcement of the lien created by a mortgage or trust indenture on Montana real property will be governed by Montana law. As to other matters, Montana generally follows the Restatement (Second) of Conflict of Laws in determining the effectiveness of a choice of law provision.

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

A receiver may be appointed in judicial foreclosure proceedings upon the application of the mortgagee demonstrating (a)&nbsp;that the mortgaged property is in danger of being lost, removed, or materially injured or that the property probably is insufficient to discharge the mortgage debt and (b)&nbsp;the probability of success in the foreclosure action. Mont. Code Ann. &sect;&nbsp;27-20-102(2). Appointment of a receiver is also necessary to enforce an express mortgage of rents and profits derived from the mortgaged premises.

RECEIVER AVAILABLE

Montana has no express prohibition or special rules regarding loan application, loan fees, or commitment fees, except as noted in the following section.

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

Under the Montana Mortgage Act, any person or entity doing business in Montana as a mortgage lender, mortgage broker, mortgage loan originator, or mortgage servicer with respect to any residential mortgage loan located in Montana must be licensed with the Montana Department of Administration. The Act's stated purpose is “to license certain persons in the residential mortgage industry that are outside of the traditional banking industry.” See Mont. Code Ann. Title 32, Chapter 9.

LENDER QUALIFICATION AND LICENSURE

There are no unusual provisions of Montana law relating to modification of mortgages or trust indentures. If a modification is made, it should be recorded in the office of the Clerk and Recorder of the county in which the encumbered property is located.

MODIFICATION

The State of Montana has a lien against the property rights of a person who has been judicially determined to be liable to the State for costs, penalties, and natural resource damages, pursuant to Mont. Code Ann. &sect;&nbsp;75-10-715. The lien is recorded in the records of the clerk and recorder in the county in which the property is located. Mont. Code Ann. &sect;&nbsp;75-10-720(3). If the Montana Department of Environmental Quality completes a project to restore, reclaim, or control the effects of past coal-mining on private property, the Department may file a statement of the money expended, which filed statement constitutes a super-priority lien against the property. The amount of the lien may not exceed the property's increase in value resulting from the restoration, as determined by an independent appraisal. The Department's lien has priority second only to a lien for real estate taxes. Mont. Code Ann. &sect;&nbsp;82-4-239(5)(a-c).

ENVIRONMENTAL LIEN LAWS

LOCAL BAR OPINION REPORT

<ol start="521">
 <li> INCEPTION OF LIEN: A person who furnishes services or materials pursuant to a real estate improvement contract may claim a construction lien to secure payment of the contract price. Mont. Code Ann. &sect;&nbsp;71-3-521. The construction lien extends to the interest of the “contracting owner” in the real estate, as it exists at the commencement of the work or is thereafter acquired. Mont. Code Ann. &sect;&nbsp;71-3-525(1). Within 20 days of first furnishing services or materials to the contracting owner, the claimant must give notice to the contracting owner of his right to claim a lien. Mont. Code Ann. &sect;&nbsp;71-3-531(2)-(3). The lien itself must be filed with the county clerk and recorder and a copy served on the owner within 90 days after final furnishing of services or materials or the date on which the owner files a notice of completion with the county clerk and recorder. Mont. Code Ann. &sect;&nbsp;71-3-535.</li>
</ol> The date the construction lien attaches (the beginning of its life for purposes of measuring priority) is the date of the first visible change in the physical condition of the real estate made by the first person furnishing services or materials pursuant to a real estate improvement contract. Mont. Code Ann. &sect;&sect;&nbsp;71-3-522(1), 535(5). However, where a lien is filed for preparation of plans, surveys, or architectural or engineering plans that are not used incident to producing a change in the physical condition of the property, this date of attachment is the date of filing of the lien. Mont. Code Ann. &sect;&nbsp;71-3-535(6). It also appears that if the notice of intent to file a lien is late, then the date of attachment of the lien is governed by the filing date of that notice. A notice of intent to file a lien is not required by persons who furnish services or materials in the construction of a dwelling for 5 or more families or for an improvement that is partially or entirely commercial in character. Actions to enforce construction liens in the State must be commenced within 2 years from the date of filing the lien. Mont. Code Ann. &sect;&nbsp;71-3-562. <ol>
 <li> PRIORITY: A lien on a building, structure, or other improvement or underlying land that is filed before the construction lien attaches generally has priority over a construction lien. Mont. Code Ann. &sect;&nbsp;71-3-542(2). However, to the extent of the value of the work or improvement that is severable from the property, the related construction lien has priority. Mont. Code Ann. &sect;&nbsp;713542(3). Further, if the prior recorded lien was taken to secure financing for the purpose of paying for the construction activity being liened, the construction lien takes priority. Mont. Code Ann. &sect;&nbsp;71-3-542(4).</li>
</ol>

LABOR AND MATERIAL LIEN CLAIMS - PRIORITY ISSUES

The policy generally requested by lenders is the American Land Title Company (ALTA) Loan Policy (6-17-06).

FORM OF POLICY USUALLY REQUIRED BY LENDER

There are numerous endorsements available. Among the most commonly used are endorsements covering the following: that no violations of restrictive covenants and building and use restrictions exist; the nature of improvements (single-family dwelling) with designated street address; that no environmental protection liens are of record against the property; tax parcels; damage resulting from any right to use of the surface of the land for extraction or development of minerals; invalidity, unenforceability, and loss of lien priority due to change in interest rate (on a variable rate loan); foundation location respecting existing or new construction; the zoning of the property; public street access; survey coverage; contiguity of land; and that a mortgage or trust indenture, as modified, retains its priority. &nbsp; &nbsp;

Montana

Mortgage Law Summary

Continue reading the
Mortgage Law Summary for Montana

Montana

Mortgage Law Summary

Continue reading theMortgage Law Summary for Montana

Continue reading the
Mortgage Law Summary for Montana