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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Related Topics & Key Terms
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Related Concepts
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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.
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