A Tennessee lender initiates non-judicial foreclosure on a property securing a second deed of trust. The first deed of trust holder has NOT defaulted and is current on its loan. What is the effect of the second deed of trust foreclosure on the first deed of trust lien?
Correct Answer
A) The first deed of trust survives the foreclosure sale because it is senior in priority to the foreclosing lien
When a junior lienholder (second deed of trust) forecloses, only liens that are junior to the foreclosing lien are extinguished. The first deed of trust, being senior in priority, survives the foreclosure sale and remains as an encumbrance on the property. The purchaser at the foreclosure sale takes title subject to the first deed of trust. This is a fundamental principle of lien priority in Tennessee real estate law.
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