recording act priority Forum

Discussions related to the bar exam are found in this forum
Forum rules
Anonymous Posting

Anonymous posting is only appropriate when you are sharing sensitive information about bar exam prep. You may anonymously respond on topic to these threads. Unacceptable uses include: harassing another user, joking around, testing the feature, or other things that are more appropriate in the lounge.

Failure to follow these rules will get you outed, warned, or banned."
User avatar
swtlilsoni

Bronze
Posts: 428
Joined: Tue Jun 09, 2009 1:00 am

recording act priority

Post by swtlilsoni » Sun Feb 21, 2016 11:54 pm

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?

Sue

New
Posts: 81
Joined: Wed Jan 20, 2016 7:36 pm

Re: recording act priority

Post by Sue » Mon Feb 22, 2016 12:22 am

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?
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.

User avatar
swtlilsoni

Bronze
Posts: 428
Joined: Tue Jun 09, 2009 1:00 am

Re: recording act priority

Post by swtlilsoni » Mon Feb 22, 2016 12:24 pm

Sue wrote:
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?
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.
then whats the point of the recording act?

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.

Sue

New
Posts: 81
Joined: Wed Jan 20, 2016 7:36 pm

Re: recording act priority

Post by Sue » Mon Feb 22, 2016 3:15 pm

swtlilsoni wrote:
Sue wrote:
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?
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.
then whats the point of the recording act?

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.
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.
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.

User avatar
swtlilsoni

Bronze
Posts: 428
Joined: Tue Jun 09, 2009 1:00 am

Re: recording act priority

Post by swtlilsoni » Mon Feb 22, 2016 8:10 pm

Sue wrote:
swtlilsoni wrote:
Sue wrote:
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?
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.
then whats the point of the recording act?

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.
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.
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.
hm so what does this mean:

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?

Want to continue reading?

Register now to search topics and post comments!

Absolutely FREE!


Sue

New
Posts: 81
Joined: Wed Jan 20, 2016 7:36 pm

Re: recording act priority

Post by Sue » Mon Feb 22, 2016 10:46 pm

swtlilsoni wrote:
Sue wrote:
swtlilsoni wrote:
Sue wrote:
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?
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.
then whats the point of the recording act?

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.
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.
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.
hm so what does this mean:

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?
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.

This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes priority.

User avatar
swtlilsoni

Bronze
Posts: 428
Joined: Tue Jun 09, 2009 1:00 am

Re: recording act priority

Post by swtlilsoni » Tue Feb 23, 2016 12:33 am

Sue wrote:
swtlilsoni wrote:
Sue wrote:
swtlilsoni wrote:
Sue wrote:
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?
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.
then whats the point of the recording act?

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.
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.
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.
hm so what does this mean:

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?
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.

This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes 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 priority

Sue

New
Posts: 81
Joined: Wed Jan 20, 2016 7:36 pm

Re: recording act priority

Post by Sue » Tue Feb 23, 2016 11:40 pm

swtlilsoni wrote:
Sue wrote:
swtlilsoni wrote:
Sue wrote:
swtlilsoni wrote:
Sue wrote:
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?
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.
then whats the point of the recording act?

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.
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.
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.
hm so what does this mean:

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?
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.

This question is not much about taking subject to mortgages and mortgage priorities, but mostly about recording statutes 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 priority
Oh, it means he takes the land free from the mortgagee A's interest

User avatar
Yvonnella

Bronze
Posts: 102
Joined: Wed May 25, 2011 12:53 am

Re: recording act priority

Post by Yvonnella » Tue Mar 22, 2016 5:15 pm

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.

Want to continue reading?

Register for access!

Did I mention it was FREE ?


Post Reply Post Anonymous Reply  

Return to “Bar Exam Prep and Discussion Forum”