Sec. 125. Rights Of Subsequent Mortgagees

Assuming that a mortgagee has protected his security by record or otherwise, subsequent mortgagees take a lien which is subject to the first mortgage, each in order of time.

Sometimes junior mortgages are given upon land. This is really a mortgaging of the equity of redemption and those subsequent mortgages cannot in any way affect the rights of the first mortgagee, assuming that the first mortgagee properly protects himself by record or taking possession. To illustrate the effect of a second mortgage, let us assume that A has mortgaged his property, worth ten thousand dollars, to B for five thousand dollars. Here A has an equity worth five thousand dollars. A then again mortgages the property to C for two thousand dollars. Suppose now that B forecloses. The property is sold without any lien upon it on account of C's mortgage, because otherwise A could prejudice B's rights by subsequently putting a lien upon the property in favor of C and at a sale the property would have to be sold subject to C's lien which would mean that less cash would be offered for it. What, then, are C's rights? They are practically to pay the first mortgage when it is due (if A will not do so) and step into B's place, having in that case a lien upon A's property for $7,000.00; or C may redeem in A's place for he is subrogated to this right. A junior mortgagee then has his protection in being able to take care of the first mortgage if the mortgagor does not do so, the security being ample to cover both mortgages.