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18. Will the court grant the finance company's motion?
The finance company has filed a timely motion in the foreclosure proceeding asking the court to require the bank to first foreclose on two of the four acres in the four-acre lot. The bank opposes this motion and insists that it has the right to subject the entire four-acre lot to the foreclosure sale.
The woman recently defaulted on both loans. The bank promptly initiated foreclosure proceedings and sent proper notice to all necessary parties. The current fair market value of the four-acre lot is $250,000.
A woman acquired title to a four-acre lot. Several years later, she executed a mortgage on the lot to a bank to secure repayment of a $100,000 loan. Subsequently, the woman executed a mortgage on the same four-acre lot to a finance company to secure repayment of a $50,000 loan. Both mortgages were promptly recorded.
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A is incorrect. Although this response correctly concludes that the court will not grant the finance company's motion, it misstates the rationale. The bank does not hold a purchase-money mortgage, which is a mortgage granted to secure repayment of funds advanced to purchase the property. The woman already owned the four-acre lot when she received the loan from the bank and granted the mortgage.
C is incorrect. As explained above, the bank recorded its mortgage first, so the finance company's motion will not be granted.
D is incorrect. Both mortgagees have mortgages on the entire four-acre lot. Priority of mortgages in the foreclosure process is based on the order in which the mortgages were recorded. The bank's mortgage was recorded first and thus has priority. The «two funds» rule of marshalling, which applies when two mortgagees have mortgages on one tract of land but one of them also has a mortgage on another tract of land, is not applicable in this situation. The two mortgages do not cover different tracts of land.