| Mortgages provide for the repayment of the loan | | | | as foreclosure. |
| on a specified date. The effect of failure to | | | | Foreclosure |
| redeem on the due date meant that the legal | | | | A foreclosure puts an end to the equitable right |
| right of the mortgagor to extinguish the | | | | to redeem and so destroys the equity of |
| mortgagee's rights had gone forever, and in | | | | redemption. It therefore follows that the right to |
| addition, the mortgagee could sue for repayment | | | | foreclosure cannot arise until the legal date for |
| of the loan. This did not appeal to equity, | | | | redemption has passed; for only then does the |
| therefore the courts evolved a rule that the | | | | equitable right - which is the victim in a |
| mortgagor could redeem the mortgage by paying | | | | foreclosure action - arise. An action may |
| back the mortgage debt and all interest on it at | | | | apparently commence immediately the legal date |
| any time before the mortgagee sold or | | | | has passed, but in practice however, an action for |
| foreclosed. This has had a major impact on new | | | | foreclosure is not usually begun except after such |
| home owners versus the frequency of Jamaica | | | | default as might justify a sale. While the matter |
| home rentals. | | | | of frequency is not a grave concern it does |
| This right of the mortgagor to redeem after the | | | | affect Jamaica home rentals positively, so rent |
| due date is his equitable right to redeem. But | | | | income increases for some property investors. |
| from the start of the mortgage, the mortgagor | | | | The effect of a foreclosure is that it vests in the |
| has been possessed of a species of equitable | | | | mortgagee the fee simple (or the whole of the |
| interest known as the equity of redemption. | | | | mortgagor's estate) and it also extinguishes the |
| This interest is a bundle of equitable rights, | | | | mortgagee's mortgage term and other |
| including the equitable right to redeem. | | | | subsequent mortgages. But prior mortgages are |
| Law of mortgages | | | | not affected by the foreclosure: they still subsist |
| A mortgage is a form of security for the | | | | and the result is that the foreclosing mortgagee |
| repayment of money lent. Mortgagor (Borrower) | | | | will have to redeem these prior mortgages if he |
| is the party who conveys the property by way | | | | wishes to be absolute master of the property. |
| of security. Mortgagee is the lender who obtains | | | | For example, suppose there are four mortgages |
| an interest in the property. The importance of the | | | | of the fee simple in the property which were |
| mortgage is that if the borrower fails to repay | | | | made to A, B, C and D in that order. |
| the mortgage debt, the lender has the powers | | | | If it forecloses, then the unencumbered fee |
| under the mortgage, of realizing the value of the | | | | simple vests in him because all the subsequent |
| mortgaged property and repaying himself out of | | | | mortgagees, that is, those of B, C and D are |
| the proceeds. | | | | extinguished. But if C forecloses, he only |
| Equity of Redemption - suppose a house worth | | | | extinguishes D's mortgage, those of A and B |
| $100,000 was mortgaged to secure a loan of | | | | remain and he must redeem these mortgages by |
| 25,000. Obviously, the mortgagor still has asset | | | | paying off A and B if he wishes to have the |
| worth $75,000. This is an equitable estate - the | | | | property unencumbered. Of course, in any |
| equity of redemption. Without paying off the | | | | foreclosure action by a mortgagee, subsequent |
| mortgage, the borrower can sell, lease or devise | | | | mortgage must be made parties to the action |
| his interest. This is in fact transferring the equity | | | | and are also given the opportunity to redeem the |
| of redemption. He can also mortgage it, so that | | | | mortgage of the foreclosing mortgagee. Thus, in |
| there may be a number of mortgages affecting | | | | our example, when A was foreclosing, B, C or D |
| the property. | | | | could pay off A and redeem A's mortgage, thus |
| The mortgagor has two rights to redeem his | | | | preventing their own mortgage from becoming |
| property: | | | | extinguished. |
| 1) The contractual right on the date specified in | | | | This principle has given rise to the saying, |
| the deed, and, | | | | "redeem up, and foreclose down". Therefore, any |
| 2) The equitable right to redeem, on payment of | | | | mortgagee can foreclose in an action to recover |
| principal of the loan, the accrued interest along | | | | land and action must be brought within twelve |
| with fees and loan costs, and establishing proper | | | | years from the date upon which the right of |
| notice to the mortgagee. This does not take | | | | recovery accrues. |
| effect until and unless the contractual right (the | | | | Jamaica real estate agents with house rentals |
| mortgagors prerogative) to redeem, on the date | | | | have identified that in recent times they have |
| fixed in the mortgage has passed. This process of | | | | seen a growing number of listings coming from |
| curtailing the equitable right to redeem and so | | | | financial institutions as they are unable to divest |
| leaving the mortgagee with a fee simple is known | | | | foreclosed properties. |