There is quite a lot to say about priority in regards to mortgages. One specific area often tested is whether one mortgagee can make another mortgagee a party against his will to a foreclosure action. First, a few terms:
Junior Mortgagee: This is one who has granted a mortgage to the mortgagor when there was already some outstanding mortgage in place.
Senior Mortgagee: This is the party who extended the original mortgage loan prior to the junior mortgagee granting a mortgage.
The rule to keep in mind is that a senior mortgagee cannot be made a party against his will to a foreclosure action by a junior mortgagee. Thus, if the junior mortgagee were to foreclose on his mortgage, that foreclosure would not eliminate any claims of the senior mortgagee.
A junior mortgagee, on the other hand, can be made a party against his will (and is often deemed an involuntary party) to a foreclosure action. Unlike the rule stated above, a junior mortgagee's claims will be eliminated by a foreclosure action by the senior mortgagee, but only if the junior mortgagee is a made a party to the foreclosure action. Where a senior mortgagee does join a junior mortgagee as a party to the foreclosure action, the junior mortgagee's right to foreclose is completely wiped out.
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What happens if the JR Mortgagee is not given notice about the SR Mortgagee's action to foreclose?
ReplyDeleteThank you again for your help,
Billy
If no notice, the junior's rights will not be wiped out. The analysis would be similar to senior's rights after a junior forecloses.
ReplyDeleteExcellent. Thank you.
ReplyDeleteIn the event there was a foreclosure by advertisement and NOT by action:
ReplyDeleteWhat happens if the JR mortgagee is not given notice of the foreclosure/sheriff sale by the SR mortgagee?
What happens if the JR mortgagee is given notice of the foreclosure/sheriff sale by the SR mortgagee but the JR mortgagee does nothing?
Thanks!
Junior mortgagees must be made parties to the foreclosure action, and provided notice of such action, or their rights to later foreclose will not be eliminated.
ReplyDeleteIf given notice, and made a party to the action, the junior's rights can be completely wiped out, regardless as to whether the junior chooses to do nothing.