1 Secured Transactions Assignment 26 Priority Under State Law.
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Transcript of 1 Secured Transactions Assignment 26 Priority Under State Law.
2
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6-7: Perfection
Chapter 8: Priority
Assignment 26: Priority Under State Law
3
The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6-7: Perfection
Chapter 8: Priority
Assignment 26: Priority Under State Law
Chapter 9: Specific Priority Rules
Assignment 28: Lien Creditors against Secureds
Assignment 29: Future Advances
Assignment 31: Preferences
Assignment 32: Secureds against Secureds
Assignment 36: Buyers against Secureds
Land, Fixtures, Agriculture and Minerals
5
The Big Picture
Assignment 26 revisits three prior assignments:
Assignments 4 and 5: Foreclosure sale
Assignment 3: Possession pending foreclosure
6
The Big Picture
Assignment 26 revisits three prior assignments:
Assignments 4 and 5: Foreclosure sale
Assignment 3: Possession pending foreclosure
but in the three-party context
8
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
Subordinate
Prior
Under whichsale held
9
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
Before After
Subordinate
Prior
10
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)Before After
Subordinate
Prior
11
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)
a. To the expenses of saleBefore After
Subordinate
Prior
12
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)
a. To the expenses of sale
b. To the lien under which the sale is held
Before After
Subordinate
Prior
13
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)
a. To the expenses of sale
b. To the lien under which the sale is held
c. To subordinate liens
Before After
Subordinate
Prior
14
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)
a. To the expenses of sale
b. To the lien under which the sale is held
c. To subordinate liens
d. To the debtor (ignoring unsecureds)
Before After
Subordinate
Prior
15
The Rules Governing Foreclosure
1. Sale discharges the lien under which the sale is held and all subordinate liens, §9-617
2. The buyer takes subject to prior liens
3. The proceeds go by §9-615(a)
a. To the expenses of sale
b. To the lien under which the sale is held
c. To subordinate liens
d. To the debtor (ignoring unsecureds)
No proceeds go to prior (“senior”) liens.
Before After
Subordinate
Prior
16
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on any property of the debtor
3. When rights to possession clash, the holder of the prior perfected lien has the right to possession. Grocer’s
Supply v. Intercity Investment
4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so.
Frierson v. United Farm Agency
5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and
constitutes conversion
17
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession.
3. When rights to possession clash, the holder of the prior perfected lien has the right to possession. Grocer’s
Supply v. Intercity Investment
4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so.
Frierson v. United Farm Agency
5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and
constitutes conversion
18
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession.
3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5.
4. The holder of a prior perfected lien must either foreclose or stand aside so that the holder of a junior lien may do so.
Frierson v. United Farm Agency
5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and
constitutes conversion
19
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession.
3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5.
4. Limit on 3: The prior creditor must either foreclose or stand aside so that the junior creditor can foreclose. Frierson v. United Farm Agency
5. The exercise of dominion and control over collateral a secured party has the right to possess is wrongful and
constitutes conversion
20
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession.
3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5.
4. Limit on 3: The prior creditor must either foreclose or stand aside so that the junior creditor can foreclose. Frierson v. United Farm Agency
5. Wrongful exercise of dominion and control over another’s collateral constitutes conversion
22
Notification dateNoticedate
Saledate
10 days
§9-612
A secured party must send notice to the debtor of disposition, §9-611(b)
23
Notification dateNotification
dateSaledate
10 days
§9-612
A secured party must send notice to the debtor of disposition, §9-611(b)
“Notification date” is the date on which the secured party sends that notice, §9-611(a)(1)
24
Notification dateNotification
dateSaledate
10 days
§9-612
A secured party must send notice to the debtor of disposition, §9-611(b)
“Notification date” is the date on which the secured party sends that notice, §9-611(a)(1)
The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date
25
Notification dateRecord
dateNotification
dateSaledate
10 days
§9-612
A secured party must send notice to the debtor of disposition, §9-611(b)
“Notification date” is the date on which the secured party sends that notice, §9-611(a)(1)
The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date
The record date is ten days before the notification date. §9-611(c)(3)(B).
10 days,
§9-611(c)(3)(B)
26
Notification dateRecord
dateNotification
dateSaledate
10 days
§9-612
A secured party must send notice to the debtor of disposition, §9-611(b)
“Notification date” is the date on which the secured party sends that notice, §9-611(a)(1)
The secured party must also send notice to other lien holders who perfected by filing or notation as of the record date
The record date is ten days before the notification date. §9-611(c)(3)(B).
Main rule: Notify easy-to-find lien holders, perfected as of the record date.
10 days,
§9-611(c)(3)(B)
27
Notification date
Safe harbor steps:
1. Send a search request 20-30 days before notification date
Notificationdate
Saledate
10 days
§9-612
Search request
20-30 days,
§9-611(e)(1)
28
Notification date
Safe harbor steps:
1. Send a search request 20-30 days before notification date
2. If no search report by notification date, notify only the debtor and requesters
Notificationdate
Saledate
10 days
§9-612
Search request
20-30 days,
§9-611(e)(1)
29
Notification date
Safe harbor steps:
1. Send a search request 20-30 days before notification date
2. If no search report by notification date, notify only the debtor and requesters
3. If search report, notify the creditors listed
As ofdate
Notificationdate
Saledate
10 days
§9-612
Search request
20-30 days,
§9-611(e)(1)
Searchreport
30
Notification date
Safe harbor steps:
1. Send a search request 20-30 days before notification date
2. If no search report by notification date, notify only the debtor and requesters
3. If search report, notify the creditors listed
4. Record date doesn’t matter
As ofdate
Notificationdate
Saledate
10 days
§9-612
Search request
20-30 days,
§9-611(e)(1)
Searchreport
31
Problem 26.1, page 450
17K
10K
29K
25K
How much should Kinski bid?
If she is the high bid, what title does she get?
$200 sale expense
32
Problem 26.1, page 450
17K
10K
29K
Before After
17K
25K 25K
How much should Kinski bid?
If she is the high bid, what title does she get?
$200 sale expense
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
33
Problem 26.1, page 450
17K
10K
29K
Before After
17K
25K 25K
How much should Kinski bid?
If she is the high bid, what title does she get?
$200 sale expense
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
34
8K
Problem 26.1, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
17K
10K
29K
Before After
17K
25K 25K
How much should Kinski bid? Up to $8K
$200 sale expense
35
Problem 26.1, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
17K
10K
29K
Before After
17K
25K 25K
How much should Kinski bid? Up to $8K
Expenses of sale?
$200 sale expense
8K
36
Problem 26.1, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
17K
10K
29K
Before After
17K
25K 25K
How much should Kinski bid? Up to $8K
Expenses of sale? Paid from proceeds
$200 sale expense
37
Problem 26.2, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
60K
8K
Before After
75K
How much should a buyer bid?
$200 sale expense
30K
38
Problem 26.2, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
60K
8K
Before After
75K 75K
How much should a buyer bid? Zero?
$200 sale expense
30K
60K
30K
39
Problem 26.2, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
60K
8K
Before After
75K 75K
How much should a buyer bid? Zero?
Expenses of sale?
$200 sale expense
30K
60K
30K
40
Problem 26.2, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
60K
8K
Before After
75K 75K
How much should a buyer bid? Zero?
Expenses of sale? Paid by levying creditor.
$200 sale expense
30K
60K
30K
41
Problem 26.2, page 450
1. Sale discharges the lien under which the sale is held and all subordinate liens
2. The buyer takes subject to prior liens
3. The proceeds go:
1. To the expenses of sale
2. To the lien under which the sale is held
3. To subordinate liens
4. To the debtor
Anyone want to bid $10?
60K
8K
Before After
75K 75K
How much should a buyer bid? Zero?
Expenses of sale? Paid by levying creditor.
$200 sale expense
30K
60K
30K
43
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale?
400k
$200 sale expense
270k
?
44
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale?
Before After
400k 400k
$200 sale expense
270k270k
?
45
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
Before After
400k 400k
$200 sale expense
270k
?
270k
46
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale?
Before After
400k 400k
$200 sale expense
270k
?
270k
47
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
Before After
400k 400k
$200 sale expense
270k
?
270k
48
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
c. Can we prevent the sale? Before After
400k 400k
$200 sale expense
270k
?
270k
49
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
c. Can we prevent the sale? Maybe, Grocers Supply.
Before After
400k 400k
$200 sale expense
270k
?
270k
50
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
c. Can we prevent the sale? Maybe, Grocers Supply.
Before After
400k 400k
$200 sale expense
d. Were we entitled to sale notice?
270k
?
270k
51
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
c. Can we prevent the sale? Maybe, Grocers Supply.
Before After
400k 400k
$200 sale expense
d. Were we entitled to sale notice? Remedy? 9-625(b), -617(b)
§9-611(c)(3). The secured party shall send . . . notification to . . . any other secured party that . . . perfected by the filing of a financing statement [or in a federal or certificate of title system]
270k
?
270k
52
Problem 26.3, page 450We represent Diamond Head Bank,
$270k first
a. Should we be concerned about this sale? Miami sheriff sales
b. Can we protect ourselves by buying at the sale? Yes, but we are bidding additional money
c. Can we prevent the sale? Maybe, Grocers Supply.
Before After
400k 400k
$200 sale expense
d. Were we entitled to sale notice? Remedy? 9-625(b), -617(b)
§9-611(c)(3). The secured party shall send . . . notification to . . . any other secured party that . . . perfected by the filing of a financing statement [or in a federal or certificate of title system]
270k
?
270k
53
The Rules Governing Possession1. §9-609. After default, a secured party may take possession
of the collateral.
2. A judgment creditor has the right to levy on encumbered or unencumbered property. The sheriff takes possession.
3. The senior secured party “is entitled, by virtue of its priority, to take possession of collateral from the junior secured party.” §9-609, comment 5.
4. Limit on 3: The prior creditor must either foreclose or stand aside so that the junior creditor can foreclose. Frierson v. United Farm Agency
5. Wrongful exercise of dominion and control over another’s collateral constitutes conversion
55
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
800k
100k
$1.2m
56
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
800k
100k
$1.2m
57
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k?
Before After
800k
100k
$1.2m
58
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k?
Before After
$1.2m $1.2m
800k
100k
800k
59
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
Before After
800k800k
100k
$1.2m $1.2m
60
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
c. What if friend pays on $100k mortgage, defaults on $800k? Before After
100k
800k
$1.2m
61
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
c. What if friend pays on $100k mortgage, defaults on $800k? Before After
800k
100k
$1.2m $1.2m
62
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
c. What if friend pays on $100k mortgage, defaults on $800k? Before After
d. Can we protect ourselves by provision in the mortgage?
800k
100k
$1.2m $1.2m
63
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
c. What if friend pays on $100k mortgage, defaults on $800k? Before After
d. Can we protect ourselves by provision in the mortgage?
Cross default clause helps a little
800k
100k
$1.2m $1.2m
64
Problem 26.4, page 451
Friend wants to borrow $100k on a second mortgage
a. If friend doesn’t pay $100k mortgage, what will we do?
b. Will we recover our $100k? Yes
c. What if friend pays on $100k mortgage, defaults on $800k? Before After
d. Can we protect ourselves by provision in the mortgage?
Cross default clause helps a little
“Wraparound” mortgage. She pays on $900k, we pay on $800k.
800k
100k
$1.2m $1.2m
65
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sues Intercity and recovers $24K in damages from the levy
3. Grocers Supply gives the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
66
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Grocers Supply gives the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
67
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
68
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
69
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
70
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory
judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
71
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Motion to set aside earlier judgment for fraud? Declaratory judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
72
1. Intercity levied on Grocery Store inventory for a $36K judgment
2. Grocers Supply sued Intercity; won return of collateral plus $24K in damages. Why?
3. Intercity released levy; Grocers Supply gave the inventory back to Grocery Store
4. Intercity: What should we do now?
Pessimist: Intercity can’t collect
Optimist: Grocers Supply had right to property only for sale
5. How do we raise it? Don’t levy. Motion to set aside earlier judgment for fraud? Declaratory judgment action?
Problem 26.5, page 451
600K
36K
Grocer’s
Supply
85
Problem 26.6, page 445
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
90K
86
Problem 26.6, page 445
Before After
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
90K 90K
87
Problem 26.6, page 445
Before After
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure?
90K 90K
88
Problem 26.6, page 445
Before After
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the tax
90K
90K
90K
89
Problem 26.6, page 445
Before After
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the tax
90K
Amalgamated Bank v. Superior Court, 57 Cal. Rpt. 3d 686 (2007). The bank’s designated bidder got stuck in traffic on the way to the foreclosure sale. Property worth $6.5 million was sold for $2,000. The court confirmed the sale.
90K
90K
90
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back?
90K
After
90K
90K
91
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
90K
After
90K
90K
92
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
90K
After
90K
90K
Debtor
Guarantor
CreditorDebt
Guarantee
93
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
90K
After
90K
90K
Debtor CreditorDebt
PaymentGuarantor
94
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
90K
After
90K
90K
Debtor Debt Guarantor
95
Problem 26.6, page 445
Before
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
c. What provisions should be in Fidelity’s mortgage?
90K
After
90K
96
Problem 26.6, page 445
Default
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
c. What provisions should be in Fidelity’s mortgage?
Failure to pay property taxes is a default.
90K
97
Problem 26.6, page 445
Default If tax paid
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
c. What provisions should be in Fidelity’s mortgage?
Failure to pay property taxes is a default.
Secured may pay the taxes and add them to the mortgage.
90K 90K
92K
98
Problem 26.6, page 445
With escrow
90K
2K
Property taxes have priority over preexisting liens
a. If the state forecloses its property tax lien, what effect on Fidelity’s mortgage?
Mortgage is discharged
b. How can Fidelity self-protect during foreclosure? Bid or pay the taxIf Fidelity pays, how get the money back? Subrogation?
c. What provisions should be in Fidelity’s mortgage?
Failure to pay property taxes is a default.
Secured may pay the taxes and add them to the mortgage
Debtor must pay estimated taxes into escrow monthly
90K