Dueling Lienholders

So what happens when a bank loans money to a customer and takes a mortgage on the customer’s property, then refinances the loan a few years later by discharging the earlier mortgage and taking a new mortgage, only to find out later that there was an intervening lien? Who’s in first place? The bank or the intervening lien creditor?

That’s a stickie question, and it’s one that Michigan hadn’t really addressed. Until earlier this month. On December 15, 2011, the Michigan Court of Appeals held that the bank’s mortgage is still in first place.

But creditors should still be cautious. The Court held that the rule may not apply in all circumstances, and it emphasized that, if the refinancing lender is not the same lender that did the first mortgage, the rule would not apply.

The name of the case is Citimortgage, Inc. v. Mortgage Elec. Registration Sys., Inc.

Eric J. Scheske

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