Forclosure Lein Laws

[modhatter]

Is anybody familiar with forclosure lein laws? I was told that when a residential propery is forclosed on, that all prior leins (other than Federal leins and taxes) are wiped out in the final forclosure. Does anyone know this for a fact?

 

[Gumby]

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[Martha]

Is anybody familiar with forclosure lein laws? I was told that when a residential propery is forclosed on, that all prior leins (other than Federal leins and taxes) are wiped out in the final forclosure. Does anyone know this for a fact?

1. To my knowledge, property taxes always are due and can not be wiped out in a mortgage foreclosure.
2. Every state that I am familiar with provides that all liens junior to the mortgage are wiped out, with the junior lien holders having the right to redeem from the senior lender in one way or another. This is even true if the junior lien is a federal tax lien. If the lien was filed junior to the mortgage, the tax lien can be foreclosed out.
3. Commercial/residential treated no different with respect to priority rules.
4. There are all sorts of exceptions for mechanics liens (for work or materials provided to the property). These can have priority in some circumstances if the work was begun on the property before the mortgage was filed.

Years ago I had a client that had a mortgage on a commercial property. The owner went out of business. My client failed to file its mortgage timely. As a result, a judgment and numerous federal and state tax sales and income tax liens were filed first. The judgment for $3000 was filed before anything else. We bought the judgment for $300. Foreclosed the judgment lien. None of the tax lien filers redeemed. My cllient essentially got the property for $300.

 

[Gumby]

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