What rights does the second mortgage holder have with respect to a first mortgage holder?
Very often the first mortgage holder will allow the second mortgage holder to continue making paying on the first mortgage after the second mortgage holder has foreclosed the second mortgage and taken title to the property, in other words assume the first mortgage. But it does not APPEAR they are required to do so.
In Barnes V Resolution Trust Corporation 664 So 2nd 1171 (4th district 1995) the second mortgagee (lender) began making payments on the first mortgage after the second mortgagee had foreclosed on the second mortgage. Thereafter the first mortgagee sought to foreclose on the first mortgage. The second mortgagee argued that acceptance of installment payments by the first mortgagee from the second mortgagee estopped the first mortgagee from acceleration and foreclosure.
The Court disagreed and stated that "by terms of the mortgage, the first mortgage holder had a contractual right to foreclose when mortgagors (borrowers) defaulted. The first mortgage holder was not obligated to second mortgagees as they were not parties to the first mortgage, nor did they ever assume the first mortgage and there was no evidence that the first mortgagee...induced second mortgagee to continue making payments to satisfy first mortgage.
Also in Travers v Tilton 134 So 2d 807 (2nd DCA 1961), which suggests that to constitute estoppel, the mortgage holder must engage in conduct which intends, or reasonably calculates, to mislead to the detriment of the party asserting an estoppel.
Please note that these cases may not apply in your part of the country. The above is not intended to constitute legal advice. Please ensure you check your case with a qualified local professional.
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