A homeowner obtained a $200,000 mortgage loan from Bank A to purchase a house. The homeowner later sold the house to a buyer, who agreed to take over the mortgage payments but did not formally assume the mortgage. The buyer defaulted on the loan shortly thereafter. Bank A successfully foreclosed on the property and then pursued the original homeowner for a $50,000 deficiency. The original homeowner paid the deficiency and now seeks reimbursement from the buyer. What legal principle would most likely allow the original homeowner to recover this amount from the buyer?
The original homeowner has no claim because ownership of the property was transferred to the buyer.
The original homeowner cannot recover the deficiency because the buyer did not formally assume the mortgage.
The principle of novation applies, discharging the original homeowner from liability and preventing reimbursement claims.
The principle of subrogation applies, allowing the original homeowner to recover the deficiency from the buyer.
The correct answer is based on the principle of subrogation. Subrogation allows a party who has paid the debt of another to step into the shoes of the mortgagee to recover the debt from the responsible party. In this case, the original homeowner paid the deficiency owed to the bank and now has the right to seek reimbursement from the buyer, who was contractually obligated to make the mortgage payments. Other answers are incorrect because they either misstate legal doctrines or fail to apply appropriately to the set of facts.
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