Iko purchased a house through Stockholm Bank Pvt. ,Ltd.A year later,Iko wanted to make improvements on the mortgaged property and borrowed money from Jeremy,mortgaging the same property again.Jeremy is unaware of the mortgage of the house by Stockholm Bank and records the mortgage.Analyze the situation in case Iko is unable to repay both the mortgagees.

Assuming Stockholm Bank recorded its mortgage,this is an example of a junior mortgage-a mortgage subject to prior mortgage.In this case,a mortgagor can use the property as security for another loan.Since both the mortgages are recorded,Jeremy,who is the holder of second mortgage,can exercise his rights against the property only after prior mortgages have been paid off.If Stockholm Bank causes the property to be sold and is paid in full,Jeremy will be paid out of the proceeds that remain.The first mortgagee acts as a trustee of the surplus funds for the benefit of the junior mortgages.