In Part II of this paper, the focus is on whether the mortgagor or other holder of the equity of redemption (7) who purchases the property at the foreclosure sale of a senior lien acquires a title free and clear of junior interests.
FORECLOSURE PURCHASE BY THE HOLDER OF THE EQUITY OF REDEMPTION
This Part focuses on a variety of fact situations where the original mortgagor or the holder of the equity of redemption purchases at the foreclosure of a senior mortgage or other lien.
52) As the holder of the equity of redemption who purchased at a foreclosure sale that she precipitated, the assuming transferee is thus treated no differently than the original mortgagor.
Under this approach, the original holder of the equity of redemption, albeit tainted by unclean hands, becomes the beneficiary of a policy designed to protect bona fide purchasers and foster real estate marketability.
In slightly less than half of the states, because of a concept termed "statutory redemption," a valid foreclosure sale is not the end of the road for the foreclosed holder of the equity of redemption or other junior interests.
We have seen that the Restatement as well as the cases (other than in the BFP context) pervasively protects the foreclosed junior interest whenever the mortgagor or owner of the equity of redemption directly or indirectly purchases at a senior lien foreclosure.
76) But, as we have seen, survival and revival are also compelling in a variety of "non-recourse" settings as well--in such situations, preventing the unjust enrichment of the purchasing holder of the equity of redemption is a strong enough reason for keeping junior interests alive.