Priorities Flashcards
What must a creditor do in order to have priority with regard to a mortgage?
Record, until you properly record your mortgage you have no priority
How is priority on a mortgage determined once a creditor has recorded?
The norm is First in time first in right - Bright line streamlined rule
What is a purchase money mortgage?
A mortgage given to secure a loan that enables the debtor to acquire the encumbered land.
HYPO: C lends O $100,000 so that O can purchase Blackacre. C takes as collateral a security interest in Blackacre, the very parcel that C’s extension of value enabled O to acquire.
- C is what?
- Assuming that C records properly, he has what?
- A Purchase money mortgagee
2. He has first priority in the parcel he financed (The purchase money mortgagee’s “super priority”)
C1 lends $200,000 to O, taking a security interest in all of O’s real estate holdings, “whether now owned or hereafter acquired.”
- What is this called?
- Is this permissible?
- An after acquired collateral clause
2. Yes
HYPO: C1 records the mortgage note. Six months later, C2 lends O $50,000 to enable O to acquire a parcel known as Blueacre, taking back a security interest in Blueacre and recording that interest. Subsequently, O defaults on all outstanding obligations. All that he has left is Blueacre. Who has first priority in Blueacre, C1 or C2?
C2 - The purcahse money mortgagee has first priority in Blue Acre, the parcel after all that it financed
Are Subordination agreements permissible?
Yes, they are permissible - a senior creditor may agree to subordinate its credit priority to a junior partner