When The Wife Signs The Mortgage – Consideration

This is an issue which appears from time to time and it is important to know the answer.

Every mortgage must be supported by consideration – something of value.  If money is loaned, the borrower received something in exchange for pledging property as security (the mortgage) and so in the typical case there is consideration with no issue to litigate on that point.

What happens, though, if property is owned by husband and wife, husband borrows money, the lender requires a pledge of property as security, and so the wife is called upon to sign the mortgage.  (Remember, the wife borrowed no money.)  Is there consideration for her?  The answer is yes, because of love and affection for her husband and traditional case law supports the notion.

A new case refines the point in the commercial context. [Hathaway v. Tompkins, 8 Misc. 3d 260, 794 N.Y.S.2d 899 (Sup. Ct. 2005)].  Bank loaned money to a corporation owned by Mr. T and his former partner.  Mr. T pledged his house (via a mortgage) to the bank to collaterally secure the loan to his corporation.  Mrs. T also owned the house and so she too executed the mortgage.

In the foreclosure action she defended saying there was no consideration for her mortgage because she didn’t borrow any money.  (Even Mr. T hadn’t personally borrowed money.)  Is she correct that consideration is lacking?  No.  The mortgage holder wins.  The mortgage was supported by consideration because it benefitted the business of Mrs. T’s husband.  Therefore, foreclosure could proceed in this instance.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.