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 terminate the mortgagor’s rights was gone forever, and furthermore, the mortgagor could sue for 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 on the mortgage. 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 bundle of equitable rights, including the equitable right to redeem.
mortgage law
A mortgage is a form of security for the slow payment of money. Mortgagor (Borrower) is the party conveying the property as security. Mortgage 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 itself out of the proceeds.
Redemption Equity: Suppose a home worth $100,000 was mortgaged to secure a $25,000 loan. Obviously, the mortgagor still has $75,000 worth of assets. This is an equitable estate – the equity of redemption. Without paying the mortgage, the borrower can sell, lease or exchange the interest on it. In effect, this is transferring the equity of redemption. He can also mortgage it, so there can be multiple mortgages affecting 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, upon payment of the principal of the loan, the accrued interest together with the fees and costs of the loan, and establishing due notice to the mortgage. This does not take effect until the contractual right (the mortgagor’s prerogative) to redeem has passed, on the date stated in the mortgage. This process of restricting the equitable right to redeem and thus leaving the mortgagee with a simple fee is known as foreclosure.
Mortgage’s trial
A foreclosure terminates the equitable right to redeem and thus destroys the equity of the redemption. It follows that the right of performance cannot arise until the legal date for redemption has passed; for only then does the equitable right arise, which is the victim in an enforcement action. On the surface, an action can start immediately after the legal date, but in practice, however, a foreclosure action generally does not start except after a default that could justify a sale. While the issue of frequency is not a serious concern, it positively affects Jamaican home rentals, thus increasing rental income for some real estate investors.
The effect of a foreclosure is that it gives the mortgagee simple interest (or all of the mortgagor’s estate) and also extinguishes the term of the mortgagee’s mortgage and subsequent mortgages. But the old mortgages are not affected by foreclosure: they live on, and the result is that the mortgagee will have to redeem these old mortgages if he wants to own the property outright. For example, suppose there are four lien 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, that is, those of B, C and D are extinguished. But if C forecloses, he only extinguishes D’s mortgage, A and B’s remain, and he must redeem these mortgages by paying A and B if he wants to have the property free of encumbrances. Of course, in any foreclosure action by a mortgagee, subsequent mortgagee parties must be part of the action and are also given the opportunity to redeem the foreclosure mortgagee’s mortgage. Thus, in our example, when A foreclosed, B, C, or D could liquidate A and redeem A’s mortgage, thus 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 houses 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.