A sale of premises by the mortgagor cannot deprive the mortgagee of his lien if the mortgage is properly recorded, but as between the mortgagor and the buyer, the buyer may or may not assume the debt as a part of the consideration.
We have seen that if the mortgagee properly protects himself, his lien is good against the whole world and that if the mortgagor sells the property the buyer must take subject to the lien of the mortgage.
Where land which is sold is subject to a mortgage the mortgage is generally assumed by the buyer, for this is the best way he can protect himself, because otherwise he must rely upon the financial ability of the mortgagor to pay the debt when due, and the buyer in that case runs the risk of having to pay the debt twice, once to the mortgagor and then to the mortgagee to prevent foreclosure. Accordingly it is the usual rule for the buyer to assume the payment of the mortgage paying the difference in value to the mortgagor. Thus, if land worth ten thousand dollars is mortgaged for five thousand a buyer pays five thousand and assumes the debt. In such a case he is said to be buying the "equity," though he is in reality buying the legal title subject to the mortgage.
Where the buyer assumes the payment of the debt he becomes the principal debtor and the original mortgagor becomes the surety. In such a case, both mortgagor and purchaser can be held liable for a deficiency of the security upon foreclosure.
The mortgagee may transfer the debt and in that case the security is also transferred as an incident thereto.
Just as the mortgagor may sell the land subject to the debt, so the mortgagee or holder of the trust deed notes may transfer the debt. As the mortgage is an incident of the debt and has no existence apart from it, the right to the mortgage cannot be assigned independently of the debt and always passes as an incident of the debt.
The usual manner of assigning the debt is as follows: If the mortgage is in the mortgage form the notes are transferred and the mortgage assigned usually by a separate deed of assignment. If the mortgage is in the form of a trust deed the notes are simply transferred. Very often the notes are made payable to the order of the maker and then indorsed by him in blank, and in that event may be transferred by the mere delivery of the notes. This makes the transfer of the debt very simple.