What happens if a bank issues a loan on a property where there is already a lien in place?

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What happens if a bank issues a loan on a property where there is already a lien in place?

Have lien, as per divorce, signed by superior court, 45K @12%, filed 12/09. Ex awarded the house and a cabin. I received a judgement against her for 45K and filed a lien on the house and cabin. She took out a 2nd on house for 37K in 04/10. My lien was not paid. Bank is still looking into this. Are they not required to pay the lien? Should they have not loaned money with the lien in place, without paying the lien? House tax value 226K, first 120K, lien 45K, and now 37k in 3rd place. How can I get my money, who will pay?

Asked on August 17, 2010 under Real Estate Law, Washington

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

How the loan was obtained and the manner in which it was done matters as to the lien.  If someone is taking out additional funds without refinancing the entire mortgage, then most likely your lien would not be paid off.  The bank will look at the equity in the house to see if there is enough to cover the encumbrances (mortgages, liens, etc.).   Although it may not be prudent to have lent a 3rd mortgage it may not in any way be illegal.  I would do yourself a favor and double check that your line is properly filed.  Either the bank failed to do a title search or they missed it.  But you will want to know why they missed it to make sure that it does not happen again.   You may also want to consider another form of collection.


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