In the preceding Part of this article, the focus has been on whether traditional mortgage foreclosure rules should apply when the foreclosure purchaser, directly or indirectly, is the holder of the equity of redemption.
Does that purchase terminate the interests of the holder of the equity of redemption and other intervening junior interests in accordance with normal foreclosure rules?
82) Indeed, it is almost always the holder of the equity of redemption who has an "obligation (often personal) to pay other liens on the real estate.
In other words, the sale should terminate the interests of the holder of the equity of redemption as well as all other junior interests.
The problem, however, is that, while there are cases supporting the Restatement approach both as to the holder of the equity of redemption (88) as well as other junior interests, (89) it represents a distinctly minority position.
As a result, under the majority of cases, the purchase represents a payment of the taxes and the interest of the holder of the equity of redemption survives the foreclosure.
96) The essence of this argument is that, absent a mortgagor voluntarily giving mortgagee a deed in lieu of foreclosure post-default, a mortgagee may acquire the mortgagor's equity of redemption in the real estate only if it purchases the title at a valid foreclosure sale of its or some other mortgage on the real estate.
Second, cotenants in a tenancy in common or joint tenancy in a particular tract of land share fractional ownership in the equity of redemption (114)-- junior lienors, on the other hand, are not owners of that land, but only holders of encumbrances.
As this article explored earlier, a significant number of states have statutory redemption schemes and some of these jurisdictions confer statutory redemption rights on foreclosed junior lienors as well as on the former holder of the equity of redemption.