[startupcfo]

Two different questions appear to give conflicting answers. In both questions, it sounds like a client lends money to party A, and that money uses real estate as collateral. If Party A sells real estate to Party B with the mortgage attached to it, and Party B defaults, then who is on the hook to pay back your banking client?

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MCQ1618 states

Omega Corp. owned a factory that was encumbered by a mortgage securing Omega’s note to Eagle Bank. Omega sold the factory to Spear, Inc., which assumed the mortgage note. Later, Spear defaulted on the note, which had an outstanding balance of $15, 000. To recover the outstanding balance, Eagle:

may sue either Spear or Omega.

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But MCQ 222 states

Wilk bought an apartment building from Dix Corp. There was a mortgage on the building securing Dix’s promissory note to Xeon Finance Co. Wilk took title subject to Xeon’s mortgage. Wilk did not make the payments on the note due Xeon, and the building was sold at a foreclosure sale. If the proceeds of the foreclosure sale are less than the balance due on the note, which of the following statements is correct regarding the deficiency?

D.
Dix will be liable for the entire deficiency.

AUD - 93
BEC - 87
FAR - 77
REG - 77

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Corporate finance leader

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[nadroj]

Wilk took title subject to the mortgage. Wilk did not assume the mortgage, so Xeon can foreclose if the mortgage isn't paid, but Wilk are not liable for the deficiency. Dix is.

[Author]

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