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Liens Are Prioritized
Liens against property are typically prioritized according to the date they’re placed. The first -- your original mortgage -- is top dog, second only to tax liens. The second mortgage is usually next in line if no creditors or judgment holders placed liens between the time you took out the first mortgage and the second. Priority is important because the first lienholder in line is the first to get paid from the proceeds of a foreclosure sale. If the property doesn’t sell for enough to cover the original mortgage and the lender’s foreclosure costs, no one else gets any money. If it sells for more, the second lienholder gets the difference, but it’s often not enough to pay off the entire debt.
The Promissory Note Still Makes You Liable
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