Patricia owns a home in Newton, Massachusetts with a first mortgage balance of $320,000. She takes out a home equity line of credit (HELOC) for $50,000, which is recorded at the Middlesex County Registry of Deeds. Six months later, she defaults on both loans. Under Massachusetts recording law, which lender has priority in a foreclosure sale?
Correct Answer
B) The first mortgage lender, because it recorded its mortgage before the HELOC was recorded
Under Massachusetts's race-notice recording statute (MGL Chapter 183), priority among competing mortgage liens is generally determined by the order of recording. The first mortgage lender recorded its lien before the HELOC lender. Because the first mortgage was recorded first and the HELOC lender had constructive notice of the prior mortgage when it recorded, the first mortgage lender has senior lien priority. In a foreclosure sale, the first mortgage is satisfied first from the proceeds.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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