13. If the man prevails in an appropriate action to recover title to the property, what will be the most likely reason?

A mortgage is a security interest in real property held by a lender as a security for a debt, usually a loan of money. A mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

Foreclosure is a process by which the mortgagor's interest in the property is terminated. After the foreclosure process begins, but before the foreclosure sale occurs, the mortgagor has the equitable right of redemption, i.e., «equity of redemption.» This means that at any time prior to the foreclosure sale, the mortgagor has the right to redeem the land or free it of the mortgage by paying off the amount due, together with any accrued interest. A mortgagor's right to redeem her own mortgage cannot be waived in the mortgage itself.

If the mortgagor does not pay off the mortgage and the foreclosure proceeds, the property is generally sold to satisfy the debt in whole or in part. When a mortgage is foreclosed, the buyer at the sale will take title as it existed when the mortgage was placed on the property.

A mortgagee's right to foreclose is precluded by anything amounting to a discharge of the mortgage. Generally, full payment of the note discharges the mortgage lien. The agreement in the note, however, will normally govern whether the mortgagor may pre-pay the obligation. If the note or mortgage does not provide for pre-payment, the mortgagor has no right to pre-payment. The mortgagee may also provide for a pre-payment fee or a total prohibition of pre-payment for all or part of the mortgage term.

While all states allow borrowers to redeem their homes before a foreclosure sale, some jurisdictions provide a «statutory» right of redemption, which sets out an additional time period after the foreclosure sale during which the prior mortgagor and perhaps others have the option to pay a certain sum of money and redeem the title to the property. The right arises only by statute and only after there has been a foreclosure of the mortgage.

The common law doctrine of exoneration arises when a testator has died and the testator's will devises property that is subject to a mortgage debt for which the testator was personally liable. Exoneration would then direct that the mortgage debt be paid from the assets in the residue of the estate.

D is correct. If the man recovers the title to the property, it will be because the jurisdiction provides a statutory right of redemption, which sets out an additional time period after the foreclosure sale during which the prior mortgagor (here, the man) has the right to pay and redeem title to the property.

A is incorrect. The only way the man's use of the property as a residence would be dispositive is if the statutory right of redemption contained such a provision. Without a statutory condition that the man had to have resided in the property in order to invoke the right of redemption, the man may have used the property for residential, commercial, or any other purpose.

B is incorrect. This is a misapplication of the equitable right of redemption, which only exists until a foreclosure occurs. The man had this equitable right to pay what was due or otherwise perform his obligations after defaulting on the mortgage, but he did not exercise this right. Once the foreclosure sale happened, the man lost his ability to redeem under the equitable right of redemption.

C is incorrect. The man defaulted on his mortgage and the bank foreclosed, which is how he lost title to the property. If the man had died with the outstanding mortgage and devised the property to a testator, that person would have been personally liable and exoneration would direct the assets in residue of the estate to pay off the mortgage debt. However, because the man did not die, exoneration is inapplicable.