Lien

How Liens Work in Mortgage Lending

When a borrower takes out a mortgage, the lender files a lien against the property with the local county recorder's office. This lien remains attached to the property until the debt is fully repaid. The lien gives the lender a secured interest, meaning if the borrower fails to make payments, the lender can initiate foreclosure proceedings to recover the outstanding balance.

Liens follow the property, not the borrower. If a homeowner attempts to sell a property with an outstanding lien, the lien must typically be satisfied from the sale proceeds before the seller receives any funds.

Lien Priority and Position

Lien priority determines the order in which creditors are paid if a property is sold or foreclosed. Priority is generally established by recording date, with earlier liens taking precedence. A first mortgage holds the senior lien position, while subsequent loans such as home equity lines of credit or second mortgages hold junior positions. Property tax liens and certain government liens can take priority over even first mortgages regardless of recording date.

Types of Liens on Residential Property

• Voluntary liens result from borrower consent, such as a mortgage or home equity loan
• Involuntary liens are imposed without borrower consent, including tax liens, mechanic's liens, and judgment liens
• Mechanic's liens can be filed by contractors or suppliers who performed work on the property but were not paid

Before closing on a mortgage, lenders require a title search to identify all existing liens. Any outstanding liens must be resolved or accounted for before the new loan can be finalized. Title insurance protects the lender and buyer against undiscovered liens that may surface after closing.