Chapter 11 - § 11.5 • OBLIGATION SECURED

• Jurisdiction: Colorado

§ 11.5 • OBLIGATION SECURED

§ 11.5.1—Necessity for Obligation

To constitute a mortgage,⁶⁰ equitable or otherwise, the instrument must secure an underlying obligation;⁶¹ there can be no mortgage if there is no debt or obligation.⁶² It is not necessary, however, that the amount of the obligation be stated.⁶³ An antecedent debt is sufficient consideration for a deed of trust.⁶⁴

A deed of trust given to secure a note conditioned upon the dismissal of a criminal proceeding is void as against public policy.⁶⁵

§ 11.5.2—Future Obligations or Advances

Prior to August 7, 2002, a mortgage could cover future advances,⁶⁶ and need not have stated on its face that such was its purpose.⁶⁷ If a mortgagee was obligated to make future advances, he or shewas protected for the full amount of such advances whether made before or after an intervening lien attached.⁶⁸ If it was optional with the mortgagee to make or refuse the future advances, he or she was protected only as to the advances made before the attaching of the junior lien or encumbrance.⁶⁹ A mortgage could be silent as to future advances, or it could specify a fixed sum for which the security was given, and advances within that limit were protected, the amount, as well as the purpose of the security, being established by parol evidence.⁷⁰

On and after August 7, 2002, a mortgage may, by its terms, secure future advances up to a total maximum principal amount expressly set forth in the mortgage. The mortgage is effective to secure payments of all advances, both obligatory and optional, up to the stated maximum principal amount to the same extent and with the same effect and priority as if the total maximum principal amount had been fully disbursed on or before the date the mortgage was recorded.⁷¹ The foregoing does not apply to any subsequent advance against a mortgage instrument after a mortgagee has initially advanced principal up to the maximum amount stated in the mortgage, unless the mortgage instrument clearly states that it was made pursuant to a revolving credit agreement.⁷² The priority provided for as mentioned above does not apply to the priority of general mechanic's liens.⁷³

§ 11.5.3—Other Debts

A "dragnet" clause, i.e., a clause that provides that the mortgage secures "all other sums, liabilities and demands, direct or contingent, now or hereafter owing," is strictly construed against the lender.⁷⁴

§ 11.5.4—Taxes, Insurance, and Other Charges

So long as a mortgage remains in force, it is the duty of...