Mike Owned a Piece of Property Known as Blackacre

question 58

Multiple Choice

Mike owned a piece of property known as Blackacre.The Bank of Montreal has a mortgage against Blackacre in the amount of $200 000.The property is worth $400 000.Mike borrows $100 000 from Bob and created a mortgage over Blackacre in favor of Bob.Mike subsequently borrows $100 000 from Jack and created a mortgage over Blackacre in favor of Jack.Due to Mike's gambling habit he has not paid back any part of the loans to either Bob or Jack.The economic downturn has recently caused the value of Blackacre to drop to $300 000.Which of the following is true?

• A)It is possible that Jack may be a subsequent mortgagee to the Bank of Montreal,but have priority over Bob.
• B)If Blackacre is sold for $300 000,the Bank of Montreal,Bob,and Jack,will each get $100 000 .
• C)If Blackacre is sold for $300 000,the Bank of Montreal will get $200 000,Jack will get $100 000,and Bob will get $100 000.
• D)The concept of the equity of redemption is irrelevant with respect to subsequent mortgages.
• E)The terms of a subsequent mortgage must reflect the mortgagor's equity of redemption.

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Definitions:

U.S. Dollar

The recognized monetary unit of the United States, extensively employed as a standard in global commerce and financial activities.

British Enterprise

Entities engaged in commercial, industrial, or professional activities within the United Kingdom.

Appreciated

The increased value of an asset or currency over time, often due to market or economic factors.

Return on Investment

A ratio that measures the gain or loss generated on an investment relative to the amount of money invested.