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26. Will the court likely find the man liable for the deficiency?
After the investor had made several payments on the loan, she defaulted on two payments. The lender notified the man and the investor of its intention to accelerate the loan pursuant to the terms of the note and mortgage unless the default was cured within 60 days. When neither the man nor the investor made the required payment, the lender accelerated the loan and initiated foreclosure proceedings, naming both the man and the investor as party defendants. The foreclosure sale resulted in a deficiency. The lender has sought a deficiency judgment against only the man, because the investor has become insolvent in the meantime.
A man borrowed money from a lender and mortgaged land that he owned to secure repayment of the loan. Before he had completely repaid the loan, the man conveyed the land to an investor, who expressly assumed the loan. The note and mortgage did not contain a due-on-sale clause.
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A is incorrect. An assumption of a mortgage makes the buyer primarily liable; however, the original mortgager-debtor is still secondarily liable. Therefore, the man was not released from liability even after the sale and assumption.
B is incorrect. This is an incorrect conclusion of law. The mortgagee may opt to sue either the grantee or the original mortgagor on the debt.
D is incorrect. This is the correct conclusion but the incorrect reasoning. A due-on-sale clause allows the lender to demand full payment of loan if the mortgagor transfers the interest. Here, the lender did not seek payment until the investor defaulted.