The failure of a mortgagee to file a claim in the probate of an estate does not bar the mortgagee from later pursuing a foreclosure, the U. S. Court of Appeals for the First Circuit recently held.

The plaintiff inherited a house from his mother's estate. The property was subject to a reverse mortgage, which contained an acceleration clause and power of sale, and became due and payable upon the mother's death. The estate was administered and closed without the holder of the reverse mortgage asserting any claim against the estate. Following the close of probate, the mortgagee instituted foreclosure proceedings against the property. The plaintiff filed suit, challenging the mortgage and the foreclosure as invalid based on the mortgagee's failure to file a claim in the probate proceedings.

The Court considered whether probate proceedings extinguish a real estate mortgage and the accompanying right to foreclose. In reaching its decision, the Court found a compelling analogy in the realm of bankruptcy law, which provides that a creditor may recover the deficiency on a mortgage loan through an action against in the debtor in rem despite the debtor's discharge in bankruptcy.

The Court also cited authority from the U.S. Supreme Court noting a lender's right to foreclose on a mortgage can be viewed as an equitable remedy for the debtor's default on payment of the underlying debt. Thus, the Court reasoned the right to foreclose on a mortgage should be treated as separate and distinct from the right to collect on the underlying debt. The Court found that while the failure to file a claim in a probate proceeding may extinguish the personal liability on the note secured by the mortgage, the same failure does not extinguish the mortgage itself. Therefore, the Court held the failure to file a claim on the debt in probate proceedings would not interfere with the right of a mortgagee holding a reverse mortgage to proceed against the real property that secures the debt.