PastPaperHero | Mortgages/security devices - Necessity and nature of obligation

Learning Outcomes

This article explains the necessity and nature of the primary obligation in mortgages and other real estate security devices, including:

Why every mortgage or deed of trust must secure a valid, legally enforceable obligation for foreclosure to be available.
The range of obligations that may be secured—present, future, and contingent debts; guaranties; and third‑party obligations—and how to recognize them in MBE fact patterns.
The relationship between the note and the mortgage (or deed of trust), the rule that the mortgage follows the note, and how transfers, assignments, and negotiations affect who may enforce the security.
How defenses to the secured obligation—such as illegality, failure of consideration, fraud, duress, mistake, incapacity, modification without consent, and discharge—operate as defenses to foreclosure, including the impact of holders in due course.
The distinction between personal liability on the note and liability of the land (recourse vs. nonrecourse loans; assumption vs. taking subject to) and how that distinction shapes remedies, including foreclosure sales and deficiency judgments.
Strategies for approaching MBE questions that test the existence, validity, modification, or discharge of the secured debt so you can avoid common traps and select the legally precise answer.

MBE Syllabus

For the MBE, you are required to understand mortgages and security devices, with a focus on the following syllabus points:

The requirement that a mortgage or security device secures an enforceable obligation (debt or promise).
The types of obligations that may be secured (present, future, contingent, and obligations of third parties such as guarantors).
The effect of the absence, invalidity, modification, or discharge of the secured obligation on the enforceability of the mortgage and the right to foreclose.
The relationship between the note (or other evidence of debt) and the security instrument, including the rule that “the mortgage follows the note” and the consequences of assignments.
The difference between personal liability on the debt and liability of the land (recourse vs. nonrecourse; assumption vs. taking subject to), and how these concepts affect remedies such as foreclosure and deficiency judgments.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

Which of the following is required for a mortgage to be valid and enforceable?
1. The mortgage must be in writing and signed by the mortgagor.
2. The mortgage must secure an enforceable obligation.
3. The mortgage must be recorded.
4. The mortgage must be given to a bank.
If a mortgage is executed to secure a debt that is later found to be void for illegality, what is the effect on the mortgage?
1. The mortgage remains enforceable.
2. The mortgage is void and unenforceable.
3. The mortgage can be foreclosed but only for nominal damages.
4. The mortgage automatically converts to a lien.
Can a mortgage secure a future or contingent obligation?
1. No, only present debts may be secured.
2. Yes, if the parties intend and the obligation is described.
3. Only if the future obligation is certain to arise.
4. Only if the mortgage is recorded.

Introduction

A mortgage or other real estate security device is only as effective as the obligation it secures. For a mortgage, deed of trust, or similar instrument to be enforceable, there must be a valid, legally enforceable obligation—typically a debt or promise to pay. The nature and existence of this obligation is fundamental: without it, the security device cannot be foreclosed or otherwise enforced.

Key Term: Mortgage
A security interest in real property given to secure the performance of an obligation, usually the repayment of a loan.

On the MBE, mortgages almost always appear in a two‑document structure:

A note (or other evidence of debt), and
A mortgage or deed of trust securing payment of that note with specific real estate.

Key Term: Note
A written promise to pay a specified sum, usually secured by a mortgage or deed of trust.

Key Term: Deed of Trust
A three‑party security instrument in which the borrower (trustor) conveys an interest in land to a trustee to secure repayment of a loan owed to a lender (beneficiary). For MBE purposes, a deed of trust is treated the same as a mortgage.

The MBE will often test whether you appreciate that the security instrument (mortgage or deed of trust) is accessory to the primary obligation. The central questions are:

Does an enforceable obligation exist?
What is its nature (present, future, contingent, recourse, nonrecourse)?
Has it been modified, transferred, or discharged?

Only after answering these questions should you analyze foreclosure, priorities, or deficiency judgments.

What Counts as an “Enforceable Obligation”

The secured “obligation” does not have to be a conventional bank loan, but it must be something the law is prepared to enforce.

Typical secured obligations include:

A promise to repay money (e.g., a promissory note for a purchase‑money mortgage).
A promise to perform services or complete a construction project.
A guaranty or suretyship obligation (e.g., “I will pay if my son does not.”).
An obligation arising under a line of credit or future advance agreement.

An obligation may be:

Monetary (paying a sum of money), or
Non‑monetary (e.g., completing a building to specification), as long as it is legally enforceable.

Key Term: Primary Obligation
The debt, promise, or other enforceable duty that a mortgage or security device is intended to secure.

The legal status of the primary obligation matters:

If the primary promise is void (e.g., illegal contract, usurious loan the statute declares void, complete failure of consideration), the mortgage is also void.
If the primary promise is voidable (e.g., induced by misrepresentation, duress, or signed by a minor), the mortgage is enforceable unless and until the primary obligation is rescinded or avoided. Once the debtor effectively avoids the obligation, the security falls with it.

Illegality and Public Policy

Many exam fact patterns involve an obligation that violates a statute or public policy:

If a statute declares the transaction void (e.g., certain illegal gambling debts), neither the note nor the mortgage is enforceable.
If the statute merely limits the remedy (e.g., a usury law that reduces interest to a legal rate rather than voiding the loan), the mortgage remains enforceable to the extent of the valid obligation (principal plus lawful interest).

Always read carefully: if the question says the loan “is void under the usury statute,” treat the obligation—and thus the mortgage—as unenforceable.

Failure of Consideration

A frequent MBE trap is a loan that is never actually funded:

The borrower signs a note and mortgage, but the lender never advances the money.
This creates a total failure of consideration for the note. The note is unenforceable, and because there is no valid debt, the mortgage is a nullity.

Conversely, if only part of the funds are advanced, the mortgage is typically enforceable pro tanto—to the extent of the actual advances—if the security was intended to cover those advances.

The Necessity of a Primary Obligation

A mortgage or security device is not an independent contract. It is an accessory to a primary obligation, most commonly a promissory note or other debt. The security instrument is intended to give the creditor recourse to specific property if the debtor defaults.

Key consequences:

No debt, no mortgage. If there is no valid obligation, the mortgage is a nullity.
A creditor cannot foreclose or enforce the security device if:
- The debt is void (e.g., illegal gambling loan).
- The debt has been paid in full or otherwise discharged.
- The debt never came into existence (e.g., the lender never made the promised advance, or a condition precedent to the loan never occurred).

On the MBE, look for fact patterns where:

The lender never advances the funds.
The “loan” is based on a totally fictitious or illegal transaction.
The mortgagor signs security documents but later validly rescinds the primary contract (for fraud, duress, or other voidable‑contract grounds).

In each of these, the security cannot be foreclosed because there is no enforceable obligation to secure.

Conditions Precedent to the Loan

Some transactions are structured so that the lender’s obligation to lend and the borrower’s obligation to repay are conditional:

Example: A mortgage is given to secure “all amounts actually advanced under this construction loan agreement.” If the lender is not required to advance money until certain conditions (permits, inspections) are met and those conditions never occur, there may be no primary obligation—and the mortgage cannot be enforced.

Be careful not to treat mere disputes about performance (e.g., borrower’s default under a separate agreement) as destroying the obligation; the key is whether an enforceable duty to pay ever arises.

Types of Obligations That May Be Secured

A mortgage may secure more than one type of obligation. For MBE purposes, you should be comfortable with at least three categories.

Present, Existing Debt

This is the classic scenario:

The lender advances $300,000 to the borrower at closing.
The borrower signs a note promising to repay.
The borrower gives the lender a mortgage on Blackacre to secure the note.

The mortgage immediately attaches to the land as security for that present obligation.

Future Advances

Key Term: Future Advance
A loan or extension of credit to be made after the execution of the mortgage, which the mortgage secures if so stated.

A mortgage may secure future advances in addition to current ones:

Example: A construction loan of up to $1 million, to be disbursed in stages as work progresses. The mortgage, signed at the outset, typically states that it secures not only the initial advance but also all future advances made under the loan agreement.

Two points are critical:

The parties must intend the mortgage to secure future advances.
The future obligations must be described or identifiable (e.g., “all present and future advances made by Lender to Borrower under this Construction Loan Agreement”).

Many mortgages go further and contain a dragnet clause.

Key Term: Dragnet Clause
A clause in a mortgage providing that the mortgage secures not only the specific loan described, but also all other obligations now or hereafter owed by the mortgagor to the mortgagee.

Example dragnet language: “This mortgage secures all obligations now or hereafter owing by Borrower to Lender.”

MBE trap: If an instrument clearly contains a dragnet clause, later loans from the same lender are usually secured by the original mortgage, even if no new mortgage is signed, unless the clause is expressly limited (e.g., to loans of a specified type).

Contingent and Third‑Party Obligations

Mortgages can also secure contingent obligations:

A guaranty or suretyship: “Owner mortgages Blackacre to secure her guaranty of her brother’s business loan.”
An obligation that will arise only if certain events occur (e.g., a letter of credit reimbursement obligation).

As long as the contingent obligation is legally enforceable once the contingency occurs, and the parties intend it to be secured, the mortgage is valid.

This includes situations where the mortgagor is not the primary debtor:

Parents mortgage their home to secure an adult child’s promissory note.
A corporation mortgages its plant to secure its subsidiary’s bond issue.

The mortgage remains accessory to the primary obligation, even though the property owner is not the primary obligor.

Guaranties, Suretyships, and Modifications of the Debt

Securing someone else’s debt raises additional issues when the primary obligation is later modified.

If Owner mortgages Blackacre to secure Borrower’s note, Owner is effectively acting as a surety with respect to the land. Under suretyship principles:

A material modification of the secured obligation (e.g., extending the maturity date, increasing the interest rate) without the surety’s consent can discharge the surety’s obligation, at least to the extent the modification increases the risk.
Applied to mortgages, a significant modification of the note without the mortgagor‑surety’s consent may discharge the mortgagor’s personal obligation and, in some jurisdictions, the related security interest.

On the MBE, if the facts emphasize that the mortgage was given to secure someone else’s debt and the lender substantially modifies that debt without the mortgagor’s consent, recognize a potential defense based on suretyship principles.

Effect of Invalid, Discharged, or Nonexistent Obligation

If the primary obligation is void (for example, due to illegality or lack of consideration), the mortgage is unenforceable. If the debt is paid in full or otherwise discharged, the mortgage is extinguished and cannot be foreclosed. If the obligation never existed, the mortgage is a nullity.

Typical defenses to the primary obligation that, if successful, destroy the security as well include:

Failure of consideration (lender never disburses the funds).
Duress or undue influence in obtaining the borrower’s promise.
Mistake (e.g., mutual mistake as to the nature or existence of the debt).
Fraud, especially fraud in the factum (where the signer does not understand that they are signing a note at all).

Real property law captures this with a straightforward rule: because a mortgage is granted to secure an obligation, any defense to the debt is also a defense to foreclosure, subject to one important refinement discussed below (holders in due course).

Personal vs. Real Defenses and Holders in Due Course

When the note is negotiable and transferred to a holder in due course (HDC), different defenses apply.

Key Term: Holder in Due Course
A transferee of a negotiable instrument who takes it for value, in good faith, and without notice of defenses or claims, and who therefore takes free of most “personal” defenses but subject to certain “real” defenses.

A holder in due course of the note:

Takes free of personal defenses (e.g., ordinary fraud in the inducement, most misrepresentations, breach of contract).
Takes subject to real defenses (e.g., infancy where it makes the contract void, duress rendering the obligation void, illegality rendering the obligation void, fraud in the factum, discharge in bankruptcy).

Because the mortgage follows the note, if an HDC can enforce the note against the borrower, the HDC (or its assignee) can normally foreclose the mortgage as well. Thus:

A mortgagor who was defrauded in the inducement of the loan may be able to defeat the original lender but may not be able to defeat an HDC of the note.
Real defenses (e.g., a forged signature on the note) remain effective even against an HDC; in that case, the note and the mortgage are both unenforceable.

The MBE often signals an HDC by emphasizing that the note is negotiable and that the transferee took it “for value, in good faith, and without notice of defenses.”

Key Term: Discharge of Obligation
The satisfaction or extinguishment of the debt or duty secured by a mortgage, resulting in the release of the security interest.

Discharge may occur by:

Payment in full (including lawful interest).
Valid tender of payment plus unjustified refusal by the creditor.
Accord and satisfaction (agreement to accept a substitute performance).
Novation or substitution of a new obligation agreed to replace the old.
Merger (mortgagee later acquiring full title to the property).
Acceptance of a deed in lieu of foreclosure.

Once the obligation is discharged, the mortgage is extinguished. If it is not released of record, it remains a cloud on title, but it is no longer substantively enforceable.

Relationship Between the Note and the Security Instrument

The note (or other evidence of debt) and the mortgage are separate but related. The note is the borrower’s personal promise to pay; the mortgage secures that promise with real property.

If the note is unenforceable, the mortgage cannot be foreclosed (because there is no enforceable obligation).
If the mortgage is defective but the note is valid, the creditor may sue on the note as an unsecured creditor but cannot foreclose on the property.

The general principle is that the mortgage follows the note:

A valid transfer of the note automatically carries the mortgage with it, even if the mortgage is not separately assigned.
An attempt to assign the mortgage without the note is usually ineffective; the assignee will not have an enforceable claim to payment unless the debt itself is also transferred.

This matters for both who can sue and who must be paid.

Who May Enforce the Note and Mortgage

The party entitled to foreclose is the one who is entitled to enforce the note. If the note has been:

Negotiated (endorsed and delivered) to a new holder, that holder can enforce the note and foreclose the mortgage.
Assigned (non‑negotiable note) in a manner sufficient to transfer contract rights, the assignee can enforce the note and foreclose, at least after giving notice to the borrower.

If the plaintiff in a foreclosure action cannot show that it currently holds or has the right to enforce the note, it lacks standing to foreclose.

On the MBE, if a bank sues to foreclose but has already assigned the note to another entity, recognize that the bank may no longer be the proper party to foreclose.

Payment to the Wrong Party

Suppose the original mortgagee assigns the note and mortgage to a third party. What if the mortgagor, unaware of the assignment, continues paying the original mortgagee?

The effect depends on whether the note is negotiable.

For a negotiable note (common in residential lending), the UCC provides that once the original payee transfers possession to a new holder, payment to the original payee does not discharge the obligation. The new holder can still demand payment, and the mortgagor’s recourse is against the party who wrongly accepted payment.
For a nonnegotiable note, the modern rule (Restatement approach) is more forgiving: payment to the original payee is effective against the transferee until the mortgagor receives notice of the transfer. After notice, payment must be made to the transferee.

This rule was illustrated in the source example:

A borrows $50,000 from B and gives B a nonnegotiable note for that amount, secured by a mortgage on Blackacre. One year later B assigns the note and mortgage to C, transferring actual possession of the note to C. Two years thereafter, A, who does not realize that B no longer holds the note, pays$ 50,000 plus interest to B. This payment is effective against C. C’s recourse is against B.

On the MBE, if the facts emphasize that the note is negotiable and that it has been transferred to a new holder, payment to the original mortgagee does not protect the mortgagor.

Personal Liability vs. Security Liability

The obligation secured can take different forms, and the remedies available to the creditor depend on that structure.

Key Term: Recourse Loan
A loan under which the borrower is personally liable on the note; the creditor can pursue both the property and the borrower’s other assets.

Key Term: Nonrecourse Loan
A loan under which the borrower is not personally liable on the note; the creditor’s sole remedy is against the property securing the loan.

With a recourse obligation:

The creditor can foreclose on the property.
If the foreclosure sale proceeds are insufficient to cover the debt, the creditor may seek a deficiency judgment against the borrower (subject to state limitations, particularly for certain residential purchase‑money mortgages).

With a nonrecourse obligation:

The creditor’s only remedy is foreclosure.
No deficiency can be sought; the borrower has no personal liability.

These concepts become especially important when the mortgagor sells the property.

Assumption vs. Taking Subject To

When the mortgagor conveys the property, the grantee almost always takes subject to the existing mortgage. The question is whether the grantee also becomes personally liable on the note.

Key Term: Assumption
A grantee’s agreement to become personally liable for an existing mortgage debt; the grantee promises to pay the note in addition to accepting the land subject to the mortgage.

Key Term: Taking Subject To
A grantee’s purchase of property encumbered by a mortgage without personally assuming the mortgage debt; the land remains liable, but the grantee has no personal liability on the note.

If the grantee assumes the mortgage:
- The grantee becomes primarily liable on the note.
- The original mortgagor remains secondarily liable as a surety.
- The mortgagee may choose to sue either the grantee or the original mortgagor on the note, and may foreclose on the land.
- A material modification of the loan between the mortgagee and the grantee (e.g., increasing the interest rate) without the original mortgagor’s consent may discharge the mortgagor’s surety obligation.
If the grantee takes subject to the mortgage:
- The grantee has no personal liability on the note.
- The original mortgagor remains primarily liable on the note.
- The land remains collateral: if the debt is not paid, the mortgagee can foreclose, wiping out the grantee’s equity.
- The mortgagee cannot obtain a deficiency judgment against the grantee; any deficiency judgment must be sought against the original mortgagor.

Regardless of who is personally liable, the secured obligation is still the same note. What changes is who, in addition to the property, the creditor may pursue.

Discharge of the Mortgage vs. Discharge of the Debt

Because the mortgage is accessory to the primary obligation, discharge of the debt normally discharges the mortgage. But certain transactions raise additional issues.

Payment and Prepayment

As noted, full payment of the note discharges the mortgage. Prepayment is governed by the terms of the loan:

If the note or mortgage does not provide for prepayment, the mortgagor generally has no right to prepay without the mortgagee’s consent.
Many instruments allow prepayment but may impose a prepayment penalty; some modern statutes, such as the Dodd‑Frank Act, limit prepayment penalties for certain residential loans.

After payment, the mortgagee should execute a formal release or satisfaction of mortgage so that the lien is removed from the public record.

Merger and Deed in Lieu

If the mortgagee later acquires the mortgagor’s interest (for example, by purchasing the property), the mortgage and title may merge, extinguishing the mortgage:

Under the doctrine of merger, when the same person holds both the mortgage and the full title, the mortgage is said to merge into the fee and is extinguished, unless there is a contrary intention (for example, the mortgagee intends to keep the mortgage alive to preserve its priority over junior liens).

A mortgagor in default may also tender a deed in lieu of foreclosure, conveying title to the mortgagee in exchange for release from the debt:

Acceptance of a deed in lieu gives the mortgagee the property without the expense of foreclosure and normally extinguishes the debt and the mortgage.
The parties may negotiate otherwise (e.g., mortgagor remains liable for part of the debt), but such arrangements are unusual in residential settings.
A deed in lieu does not automatically wipe out junior liens; they may still encumber the property in the hands of the mortgagee.

Consumer‑Protection Limits on Enforcement

Modern statutes impose additional requirements on residential mortgage lenders. The key points for the MBE are:

Under the Dodd‑Frank Act, residential mortgage lenders must determine the borrower’s ability to repay before extending a loan, and loan terms must not be unfair, deceptive, or abusive. Borrowers may assert violations of these provisions as a defense in foreclosure.
After default, federal regulations often require a mortgagee to, in good faith, consider a borrower’s request for modification or other alternatives to foreclosure and may restrict “dual tracking” (pursuing foreclosure while reviewing a modification request).

On the MBE, you are not expected to know statutory details, but you should recognize a pattern where:

A statute explicitly gives borrowers a foreclosure defense based on the lender’s conduct, even though a note exists and is otherwise valid.
In such a case, the mortgage cannot be enforced unless the lender has complied with the statutory requirements.

Worked Example 1.1

A homeowner borrows $100,000 from a lender and signs a promissory note. The homeowner gives the lender a mortgage on her house to secure the loan. Later, the note is paid in full, but the mortgage is not released of record. Can the lender foreclose?

Answer:
No. Once the primary obligation (the note) is paid in full, the mortgage is extinguished. The lender cannot foreclose, even if the mortgage remains of record. The unreleased mortgage is merely a cloud on title.

Worked Example 1.2

A developer executes a mortgage to a bank to secure “all present and future advances.” The bank later lends additional funds to the developer under the same agreement. Are the future advances secured?

Answer:
Yes. If the mortgage expressly secures future advances, and the advances are made in accordance with the agreement, the mortgage secures both the original and future debts. The future obligations are identifiable and within the parties’ intent.

Worked Example 1.3

A borrower signs a note and mortgage for a $200,000 “loan.” The lender never actually advances any money. After the borrower defaults on property taxes, the lender attempts to foreclose, relying on the signed note and mortgage.

Answer:
Foreclosure should be denied. Because the lender never disbursed the funds, there is a total failure of consideration. The note is unenforceable, and because a mortgage cannot exist without an enforceable primary obligation, the mortgage is a nullity.

Worked Example 1.4

Owner signs a nonnegotiable note and mortgage in favor of Bank. A year later, Bank assigns the note and mortgage to Investor, who notifies nobody. Two years after that, Owner pays the full remaining balance to Bank, believing Bank still owns the loan. Only afterward does Owner receive a letter from Investor demanding payment and threatening foreclosure.

Answer:
Under the majority rule for nonnegotiable notes, Owner’s payment to Bank is effective until Owner receives notice of the assignment. Investor cannot demand payment or foreclose; Investor’s recourse is against Bank. The secured obligation has been discharged.

Worked Example 1.5

Seller borrows $150,000 from Bank, signing a recourse note and granting a mortgage on Blackacre. Seller later conveys Blackacre to Buyer, who “assumes and agrees to pay” the mortgage. Buyer defaults, and Bank forecloses. The sale yields$ 120,000, leaving a $30,000 deficiency. Against whom may Bank seek a deficiency judgment?

Answer:
Buyer is personally liable because he assumed the mortgage. Seller remains secondarily liable as a surety. Bank may sue either Buyer or Seller for the $30,000 deficiency (subject to any state limitations on deficiency judgments). If Bank and Buyer later materially modify the loan without Seller’s consent, Seller could argue that her surety obligation is discharged.

Exam Pitfalls and Defenses Tied to the Obligation

MBE questions often test whether you notice that a supposed mortgage is built on a defective obligation. Common traps include:

The “loan” contract is illegal (e.g., a statute declares such loans void; an extreme usury statute that voids the obligation rather than simply reducing the interest rate).
The mortgagor successfully asserts lack of capacity (e.g., was a minor and timely disaffirms, or was mentally incompetent at the time of contracting and the contract is void).
The lender materially modifies the debt without the consent of a guarantor or mortgagor whose property is pledged, potentially releasing the guarantor’s obligation and the related security.
The lender never advances all or part of the funds contemplated by the note, leading to a failure of consideration.
The borrower has already tendered full payment, but the mortgagee refuses to accept or release the lien.

For exam purposes, remember:

If the defense makes the debt void, the mortgage is unenforceable.
If the defense makes the debt voidable, the mortgage remains enforceable until the debtor (or guarantor) effectively avoids the obligation; if they do, the security drops away.
If the note is in the hands of a holder in due course, personal defenses may not be effective, and the mortgage may still be enforceable.

Exam Warning

On the MBE, beware of questions where the primary debt is void, illegal, never came into existence, or has been paid or discharged. If the obligation is invalid or discharged, the mortgage generally cannot be enforced, even if the security instrument appears valid and is duly recorded.

Additional common traps:

The fact pattern quietly states that the lender never advanced the funds.
The mortgagor has already tendered full payment, but the mortgagee refuses to accept or release the lien.
The mortgage has been assigned, but the borrower continues to pay the wrong party.
The note is nonnegotiable, and the borrower pays the original mortgagee without notice of the assignment; payment may discharge the obligation.

Always ask:

Does an enforceable obligation exist?
Has it been modified or discharged?
If the note has changed hands, is the party trying to foreclose the party entitled to enforce the note?
Are there statutory defenses (e.g., under consumer‑protection laws) that limit enforcement?

Revision Tip

Always check the status and validity of the primary obligation before analyzing foreclosure or enforcement of a mortgage or security device.

As a checklist for mortgage questions:

Identify the note (or primary obligation).
Determine whether it is valid and enforceable (void, voidable, discharged, or still outstanding).
Determine whether it has been modified, assigned, or renewed, and whether any such modification affects sureties or guarantors.
Determine who presently holds the note and thus who can enforce it.
Only then analyze the mortgage or deed of trust, foreclosure, priorities, and deficiency judgments.

Key Point Checklist

This article has covered the following key knowledge points:

A mortgage or security device is enforceable only if it secures a valid, enforceable primary obligation.
The obligation may be present, future, or contingent, and may belong to the mortgagor or to a third party, as long as it is described and intended to be secured.
Defenses to the primary obligation (illegality, failure of consideration, fraud, mistake, duress, incapacity) are also defenses to foreclosure, subject to holder‑in‑due‑course rules.
If the obligation is void, has been paid, or never existed, the mortgage is unenforceable; it may remain a cloud on title until formally released.
The note and mortgage are separate but related; the note is the personal promise, the mortgage is the security, and “the mortgage follows the note.”
Payment on a nonnegotiable note to the original payee remains effective against an assignee until the mortgagor receives notice of the assignment; for negotiable notes, different UCC rules apply.
Personal liability on the debt (recourse vs. nonrecourse) is distinct from liability of the land; assumption vs. taking subject to determines who, besides the property, can be pursued.
Discharge of the obligation—by payment, accord and satisfaction, novation, merger, or deed in lieu of foreclosure—extinguishes the mortgage.
Consumer‑protection statutes (such as Dodd‑Frank ability‑to‑repay rules and foreclosure‑process regulations) can provide defenses to enforcement even where a valid note exists.
On the MBE, always confirm the existence, validity, and current status of the secured obligation and the identity of the party entitled to enforce the note before evaluating any foreclosure.

Key Terms and Concepts

Mortgage
Note
Deed of Trust
Primary Obligation
Future Advance
Dragnet Clause
Holder in Due Course
Discharge of Obligation
Recourse Loan
Nonrecourse Loan
Assumption
Taking Subject To

Mortgages/security devices - Necessity and nature of obligat...