Legal Question in Real Estate Law in Pennsylvania
Hi,
I have a simple question I would like an answer to just to satisfy my curiosity.
It seems my neighbors have gotten themselves into a bit of a legal situation. One neighbor loaned the other neighbor approximately $250,000. The loan is contingent upon the borrower fulfilling certain obligations set forth in the loan agreement by a certain date, if the borrower should fail to uphold his end of the contract the loan would be immediately recalled. The borrower will have to pay back the entire sum of the loan plus interest. The collateral for this loan is the borrower is entire piece of property which he owns free and clear.
Now for some inexplicable reason the borrower is refusing to uphold his end of this contract for saying the lender to recall the loan. The borrower does not have the means to pay back the loan and says the lender will just have to foreclose on his property.
My question is;
since the collateral piece of property is worth considerably more than the amount of the loan, if the lender forecloses on the property does the lender get to keep the entire piece of property? Or will the property have to be liquidated to satisfy the amount of the loan with the borrower keeping any remainder?
If anyone can answer this question I would be very grateful.
By the way, the moral of the story is, never loan your mentally unstable neighbors large sums of money!
Thanks in advance.
1 Answer from Attorneys
If I understand this correctly, your neighbor gave a security interest in property for 250 K (the amount of the loan) and the property is worth more than 250 K....that is pretty standard....
When the borrower can't pay, the security instrument can be used to collect the collateral.
Meaning even if the property is worth 1 million, he will lose it
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