A Maryland property owner granted a deed of trust to Lender A in 2018 (recorded January 2018) and a second deed of trust to Lender B in 2020 (recorded March 2020). The owner defaults, and Lender B forecloses on its junior lien first, selling the property at a trustee's sale. Which statement correctly describes the effect of Lender B's foreclosure on Lender A's senior lien?
Correct Answer
D) Lender A's senior lien survives the sale because it was recorded before Lender B's lien
Under Maryland lien priority rules, a senior lien is not extinguished by the foreclosure of a junior lien. Lender A's deed of trust was recorded in January 2018, giving it priority over Lender B's March 2020 deed of trust. When a junior lienholder (Lender B) forecloses, the sale only eliminates liens that are junior to or equal in priority to the foreclosing lien. Senior liens survive the junior lien foreclosure and remain attached to the property. The purchaser at Lender B's foreclosure sale acquires the property subject to Lender A's senior lien — meaning the purchaser must either pay off Lender A or face foreclosure by Lender A.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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