A property in Manhattan is being foreclosed, and there are multiple liens on the property: a first mortgage of $800,000, a second mortgage of $200,000, property taxes of $15,000, and a mechanic's lien of $25,000. The foreclosure sale brings $750,000. After paying sale costs of $10,000, how will the remaining $740,000 be distributed under New York's lien priority rules?
Correct Answer
B) Property taxes first, then first mortgage, with no payment to junior lienholders
Under New York law, property taxes have super-priority and are paid first ($15,000), then the first mortgage receives $725,000 (leaving $75,000 unpaid on the first mortgage). Since the first mortgage is not fully satisfied, junior lienholders (second mortgage and mechanic's lien) receive nothing. Liens are paid in strict priority order, not proportionally.
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Related Topics & Key Terms
Key Terms:
Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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