The grantee of land that is “subject to” a mortgage assumes no personal liability for the obligation secured by the mortgage, where he has not by express agreement undertaken the payment thereof. A grantee who “assumes” and agrees to pay an outstanding mortgage may be held personally liable. A grantee who takes “subject to” an outstanding mortgage is threatened only with the loss of his equity in the property in the event of foreclosure.
– If the mortgagee is not a direct party to the assumption agreement, he is still treated as a third party beneficiary of the assumption agreement and has a direct cause of action at law.
– An “implied assumption” arises in PA and OK if the mortgage balance is deducted from the price.
– The Statute of Frauds is almost always held inapplicable to assumptions and parol evidence is admissible to establish an assumption transaction.
– A grantee who accepts a deed becomes contractually bound by its provisions and becomes liable to perform any promise or undertaking imposed by the deed on the grantee, including a promise to assume an existing mortgage (since assumption can be in the deed, contract for sale, or separate document).
– Consideration for assumption agreements is the equity over and above the mortgage value of the real estate that the grantee is receiving.
– HUD must release the original borrower after sale, assumption, and approval of the grantee’s credit.
– A grantee is generally estopped from asserting defenses that would have been available to the original mortgagor against the collection of the mortgage debt or foreclosure of the mortgage to prevent unjust enrichment to the grantee. Is there really unjust enrichment if the mortgagee committed fraud? Should the estoppel apply to “subject to” transfers as well?
– When does the assumption agreement vest so that the mortgagor/grantor cannot defeat it through subsequent release of the grantee? The Restatement says it vests when there is a “material change in position.”
– What is the effect of a break in the chain of assumptions?
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