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- swtlilsoni
- Posts: 428
- Joined: Tue Jun 09, 2009 1:00 am
recording act priority
If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
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- Posts: 81
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Re: recording act priority
No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
- swtlilsoni
- Posts: 428
- Joined: Tue Jun 09, 2009 1:00 am
Re: recording act priority
then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
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- Joined: Wed Jan 20, 2016 7:36 pm
Re: recording act priority
You need the recording to determine priority chronologically. Say A recorded, then B recorded, then C recorded. B is foreclosing. A is senior (don't pay attention to its name being senior, it just means it comes before the foreclosed interest), C is junior.swtlilsoni wrote:then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
All junior interests coming after the foreclosed interest are affected, but the one that was recorded before the foreclosed, i.e. senior interest, is not affected. So, C, which is subsequent, will be extinguished if there is surplus, but A, which is senior, will not be affected, and the buyer will take the property subject to A.
- swtlilsoni
- Posts: 428
- Joined: Tue Jun 09, 2009 1:00 am
Re: recording act priority
hm so what does this mean:Sue wrote:You need the recording to determine priority chronologically. Say A recorded, then B recorded, then C recorded. B is foreclosing. A is senior (don't pay attention to its name being senior, it just means it comes before the foreclosed interest), C is junior.swtlilsoni wrote:then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
All junior interests coming after the foreclosed interest are affected, but the one that was recorded before the foreclosed, i.e. senior interest, is not affected. So, C, which is subsequent, will be extinguished if there is surplus, but A, which is senior, will not be affected, and the buyer will take the property subject to A.
Facts basically said mortgage A never recorded, then purchaser A recorded. notice statute.
in answer choice A: purchaser A has priority over mortgage A
in answer choice B: mortgage A has priority over purchaser A
B is right and A is wrong.
What exactly is the difference between choice A and choice B? if purchaser takes subject to the mortgage either way, then there is no difference?
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- Posts: 81
- Joined: Wed Jan 20, 2016 7:36 pm
Re: recording act priority
Because the subsequent purchaser takes the land subject to only recorded mortgage. Since mortgagee A did not record, and this a notice statute jurisdiction, assuming purchaser A got the land for value, he was a BFP, without notice of prior mortgage, and he prevails. It does not matter if Purchaser A recorded or not. He was a BFP, did not have a notice of mortgage A, so he prevails. He would have prevailed even if Mortgagee A was a purchaser as well. Like two purhcasers - A and B.swtlilsoni wrote:hm so what does this mean:Sue wrote:You need the recording to determine priority chronologically. Say A recorded, then B recorded, then C recorded. B is foreclosing. A is senior (don't pay attention to its name being senior, it just means it comes before the foreclosed interest), C is junior.swtlilsoni wrote:then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
All junior interests coming after the foreclosed interest are affected, but the one that was recorded before the foreclosed, i.e. senior interest, is not affected. So, C, which is subsequent, will be extinguished if there is surplus, but A, which is senior, will not be affected, and the buyer will take the property subject to A.
Facts basically said mortgage A never recorded, then purchaser A recorded. notice statute.
in answer choice A: purchaser A has priority over mortgage A
in answer choice B: mortgage A has priority over purchaser A
B is right and A is wrong.
What exactly is the difference between choice A and choice B? if purchaser takes subject to the mortgage either way, then there is no difference?
This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes priority.
- swtlilsoni
- Posts: 428
- Joined: Tue Jun 09, 2009 1:00 am
Re: recording act priority
Right so I understand why purchaser prevails, but I'm asking what that means for him? What does he get by prevailing? He gets priority.... meaning.... he doesn't have to pay? I don't see the reward in winning prioritySue wrote:Because the subsequent purchaser takes the land subject to only recorded mortgage. Since mortgagee A did not record, and this a notice statute jurisdiction, assuming purchaser A got the land for value, he was a BFP, without notice of prior mortgage, and he prevails. It does not matter if Purchaser A recorded or not. He was a BFP, did not have a notice of mortgage A, so he prevails. He would have prevailed even if Mortgagee A was a purchaser as well. Like two purhcasers - A and B.swtlilsoni wrote:hm so what does this mean:Sue wrote:You need the recording to determine priority chronologically. Say A recorded, then B recorded, then C recorded. B is foreclosing. A is senior (don't pay attention to its name being senior, it just means it comes before the foreclosed interest), C is junior.swtlilsoni wrote:then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
All junior interests coming after the foreclosed interest are affected, but the one that was recorded before the foreclosed, i.e. senior interest, is not affected. So, C, which is subsequent, will be extinguished if there is surplus, but A, which is senior, will not be affected, and the buyer will take the property subject to A.
Facts basically said mortgage A never recorded, then purchaser A recorded. notice statute.
in answer choice A: purchaser A has priority over mortgage A
in answer choice B: mortgage A has priority over purchaser A
B is right and A is wrong.
What exactly is the difference between choice A and choice B? if purchaser takes subject to the mortgage either way, then there is no difference?
This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes priority.
-
- Posts: 81
- Joined: Wed Jan 20, 2016 7:36 pm
Re: recording act priority
Oh, it means he takes the land free from the mortgagee A's interestswtlilsoni wrote:Right so I understand why purchaser prevails, but I'm asking what that means for him? What does he get by prevailing? He gets priority.... meaning.... he doesn't have to pay? I don't see the reward in winning prioritySue wrote:Because the subsequent purchaser takes the land subject to only recorded mortgage. Since mortgagee A did not record, and this a notice statute jurisdiction, assuming purchaser A got the land for value, he was a BFP, without notice of prior mortgage, and he prevails. It does not matter if Purchaser A recorded or not. He was a BFP, did not have a notice of mortgage A, so he prevails. He would have prevailed even if Mortgagee A was a purchaser as well. Like two purhcasers - A and B.swtlilsoni wrote:hm so what does this mean:Sue wrote:You need the recording to determine priority chronologically. Say A recorded, then B recorded, then C recorded. B is foreclosing. A is senior (don't pay attention to its name being senior, it just means it comes before the foreclosed interest), C is junior.swtlilsoni wrote:then whats the point of the recording act?Sue wrote:No, the subsequent purchaser gets the property subject to the senior mortgage, foreclosure does not affect any interest senior to the mortgage being foreclosed. Except when there is a subordinate agreement between the interests, or the senior one is a PMM, or if there is refinancing etc.swtlilsoni wrote:If a subsequent purchaser has priority (through the recording act) over a prior mortgage (lets say the mortgage was never recorded), then what happens? Does the mortgage get extinguished or something?
I got a question where you use the recording act to list priorities, and the answer listed a subsequent purchaser as having priority over a mortgage. I'm not sure what that means.
All junior interests coming after the foreclosed interest are affected, but the one that was recorded before the foreclosed, i.e. senior interest, is not affected. So, C, which is subsequent, will be extinguished if there is surplus, but A, which is senior, will not be affected, and the buyer will take the property subject to A.
Facts basically said mortgage A never recorded, then purchaser A recorded. notice statute.
in answer choice A: purchaser A has priority over mortgage A
in answer choice B: mortgage A has priority over purchaser A
B is right and A is wrong.
What exactly is the difference between choice A and choice B? if purchaser takes subject to the mortgage either way, then there is no difference?
This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes priority.
- Yvonnella
- Posts: 102
- Joined: Wed May 25, 2011 12:53 am
Re: recording act priority
Sue is exactly correct.
If Purchaser A was a BFP and bought the property without notice of Mortgage A, the practical effect under the Recording Act is that Mortgage A will not be secured by the real property. This is the crux of what it means to "prevail" over Mortgage A. You cannot encumber property that you do not own. Purchaser A holds the title free and clear of Mortgage A. Although the debt disclosed by Mortgage A may still be owed by the mortgagor, the mortgagee has no power of foreclosure over the property. The debt is simply an unsecured loan. Too bad for the lender.
To illustrate, assume the same facts: Purchaser A, a BFP, records her deed before Mortgage A records. Subsequently to Mortgage A being recorded, Purchaser A wants to tap into her equity with a loan of her own. If Mortgage A in fact attached to the property, then Purchaser A could only get a second-position mortgage, junior to Mortgage A. This would put Purchaser A at a disadvantage because the FMV of the property could only contain a limited amount of securitized debt. Moreover, if Mortgage A attached, then Purchaser A could not be said to hold marketable title, free and clear of Mortgage A. Ultimately, chaos would reign over land titles.
That's not the way mortgages work. Purchaser A takes the property free and clear of Mortgage A altogether. Mortgage A lies outside the chain of title by virtue of not being recorded while the mortgagor owned the property. Thus, Mortgage A may disclose a valid debt against the mortgagor and in favor of the mortgagee, but it is not secured by the real property. Foreclosure of Mortgage A would have no effect on Purchaser A, or any otherwise valid junior liens that properly fell within the chain of title. If Purchaser A decided to sell the property, her deed being superior to Mortgage A, she would convey title that was also superior to Mortgage A, and thus free and clear of it, even to a non-BFP.
The mortgagee would have only one prayer, other than having an honest borrower who faithfully repays the loan. If the mortgagor ever came back into title to the property, Mortgage A would instantly attach by the doctrine of after-acquired title.
If Purchaser A was a BFP and bought the property without notice of Mortgage A, the practical effect under the Recording Act is that Mortgage A will not be secured by the real property. This is the crux of what it means to "prevail" over Mortgage A. You cannot encumber property that you do not own. Purchaser A holds the title free and clear of Mortgage A. Although the debt disclosed by Mortgage A may still be owed by the mortgagor, the mortgagee has no power of foreclosure over the property. The debt is simply an unsecured loan. Too bad for the lender.
To illustrate, assume the same facts: Purchaser A, a BFP, records her deed before Mortgage A records. Subsequently to Mortgage A being recorded, Purchaser A wants to tap into her equity with a loan of her own. If Mortgage A in fact attached to the property, then Purchaser A could only get a second-position mortgage, junior to Mortgage A. This would put Purchaser A at a disadvantage because the FMV of the property could only contain a limited amount of securitized debt. Moreover, if Mortgage A attached, then Purchaser A could not be said to hold marketable title, free and clear of Mortgage A. Ultimately, chaos would reign over land titles.
That's not the way mortgages work. Purchaser A takes the property free and clear of Mortgage A altogether. Mortgage A lies outside the chain of title by virtue of not being recorded while the mortgagor owned the property. Thus, Mortgage A may disclose a valid debt against the mortgagor and in favor of the mortgagee, but it is not secured by the real property. Foreclosure of Mortgage A would have no effect on Purchaser A, or any otherwise valid junior liens that properly fell within the chain of title. If Purchaser A decided to sell the property, her deed being superior to Mortgage A, she would convey title that was also superior to Mortgage A, and thus free and clear of it, even to a non-BFP.
The mortgagee would have only one prayer, other than having an honest borrower who faithfully repays the loan. If the mortgagor ever came back into title to the property, Mortgage A would instantly attach by the doctrine of after-acquired title.