Pam sells to Rob property which has a $50,000 mortgage in favor of First Bank. Rob purchases the property subject to the mortgage. The value of the property declines and there is a default on the mortgage. When First Bank forecloses, the property sells for only $30,000
a. Can First Bank recover the $20,000 balance from Rob? Explain.
b. Can First Bank recover the $20,000 from Pam? Explain.
a . No, Rob purchased the property "subject to" the mortgage. This means that the mortgage does not personally obligate Rob to pay the mortgage debt and that his risk of loss is limited to the realty.
b. Yes, Pam remains personally liable for the mortgage debt. When the proceeds are insufficient to satisfy the debt in full, the debtor-mortgagor remains liable for payment of the debt. First Bank will probably obtain a deficiency judgment against Pam and may then proceed to enforce payment of the $20,000 out of other assets that Pam owns.
You might also like to view...
Which of the following is NOT a true statement?
a. Almost every fraud involves rationalization. b. All frauds involve financial or vice-related pressures. c. Perceived opportunity diminishes when fraud perpetrators are prosecuted.
How can conducting background research help the researcher?
A) Determine style and format of the report B) Identify primary and secondary audiences C) Understand the general topic D) Look for data that supports the researcher's position on the topic E) Establish a time line and budget for the project
____________________ activities involve long-term liabilities and stockholders' equity
Fill in the blank(s) with correct word
Describe some of the different forms of consideration.
What will be an ideal response?