Mortgages provide for the repayment of the loan on a certain date. The effect of non-redemption on the due date meant that the mortgagor’s legal right to extinguish the mortgagor’s rights was gone forever and, moreover, the mortgagor could demand repayment of the loan. This did not appeal to equity, so the courts developed a rule that the mortgagor could redeem the mortgage by paying off the mortgage debt and all interest at any time before the mortgagor sold or foreclosed. This has had a huge impact on new homeowners compared to the frequency of home rentals in Jamaica.
This mortgagor’s right to redeem after the due date is your equitable right to redeem. But since the inception of the mortgage, the debtor has been in possession of a kind of equitable interest known as redemption equity.
This interest is a set of equitable rights, including the equitable right of redemption.
mortgage law
A mortgage is a form of security for the slow payment of money. Mortgagor (Borrower) is the party that conveys the property as collateral. Mortgage holder is the lender who obtains an interest in the property. The importance of the mortgage is that if the borrower defaults on the mortgage debt, the lender has the powers under the mortgage to realize the value of the mortgaged property and pay himself with the proceeds.
Redemption Equity: Suppose a home worth $100,000 was mortgaged to secure a $25,000 loan. Obviously, the mortgagor still has assets worth $75,000. This is an equitable estate – the equity of redemption. Without paying the mortgage, the borrower can sell, lease or exchange interest on it. In effect, this is transferring the equity of the redemption. He can also mortgage it, so there can be multiple mortgages on the property.
The mortgagor has two rights to redeem his property:
1) The contractual right on the date indicated in the deed, and,
2) The equitable right to redeem, prior payment of the principal of the loan, the accrued interest together with the fees and costs of the loan, and establishing due notification to the mortgage. This does not take effect until the contractual right (the mortgagor’s prerogative) to redeem has passed, on the date fixed in the mortgage. This process of restricting the equitable right of redemption and thereby leaving the mortgagor with a simple fee is known as foreclosure.
Mortgage’s trial
A foreclosure ends the equitable right of redemption and thus destroys the equity of redemption. It follows that the right of execution cannot arise until the legal date for redemption has passed; for only then does equitable law arise, which is the victim in an enforcement action. Apparently, an action can be started immediately after the legal date, but in practice, however, a foreclosure action is not usually started except after a default that could justify a sale. While the frequency issue is not a serious concern, it positively affects home rentals in Jamaica, thus increasing rental income for some real estate investors.
The effect of a foreclosure is that it gives the mortgagor the fee simple (or all of the mortgagor’s estate) and also extinguishes the term of the mortgagor’s mortgage and any subsequent mortgages. But the prior mortgages are not affected by foreclosure: they remain, and the result is that the mortgagor will have to redeem these prior mortgages if he wants to own the property outright. For example, suppose there are four sworn mortgages on the property that were made to A, B, C, and D in that order.
If you foreclose, then the unencumbered domain belongs to you because all subsequent mortgagees, ie B, C and D are extinguished. But if C forecloses, he only extinguishes D’s mortgage, A and B remain, and he must redeem these mortgages by paying A and B if he wants to have the property free of liens. Of course, in any foreclosure action by a mortgagor, subsequent mortgagors must be part of the action and are also given the opportunity to redeem the mortgage from the executing mortgagor. Thus, in our example, when A foreclosed, B, C, or D could liquidate A and redeem A’s mortgage, thereby preventing their own mortgage from becoming extinguished.
This principle has given rise to the saying, “redeem and close.” Therefore, any mortgagee can execute a land recovery action and the action must be brought within twelve years from the date on which the right of recovery accrues.
Jamaican real estate agents with homes for rent have identified that in recent times they have seen an increasing number of listings coming from financial institutions as they are unable to sell repossessed properties.
