Bar Exam — MBE (Multistate Bar Exam)Real PropertyMedium
A homeowner obtained a first mortgage from Lender A and properly recorded it. Two years later, the homeowner obtained a second mortgage from Lender B, which Lender B promptly recorded. Six months after that, the homeowner obtained a third mortgage from Lender C, but Lender C failed to record its mortgage. The homeowner subsequently defaulted on all three mortgages. In a foreclosure proceeding, what is the order of priority for the lenders?
- ALender B, Lender A, Lender C.
- BLender A, Lender B, Lender C.
- CLender A, Lender C, Lender B.
- DLender C, Lender B, Lender A.
Show answer & explanationAnswer & explanation
Correct answer: B. Lender A, Lender B, Lender C.
In a notice or race-notice jurisdiction, priority among mortgages is generally determined by the order of recording. Lender A recorded first, then Lender B. Lender C failed to record, placing it last in priority among these secured creditors.
Why the other options are wrong
- A. This is incorrect. Lender B recorded after Lender A.
- C. This is incorrect. Lender C's failure to record places it behind Lender B.
- D. This is incorrect. Lender C's failure to record places it last.
Mortgage Priority (Recording)
The order in which mortgages on a property are satisfied from the proceeds of a foreclosure sale, generally determined by the order of proper recording.
- First in time, first in right (first to record, typically).
- Recording acts (notice, race-notice, race) govern priority.
- Unrecorded mortgages are generally junior to recorded ones.
Memory trick: Record first, get paid first.