Two simultaneous first mortgages on a property, one is foreclosing, what happens?
Consider this scenario:
1. Bob is purchasing a home, and starts applying for mortgages, and is shopping around. Home purchase price is $500k.
2. Two banks, namely Bank A and Bank B, offer him a first mortgage, each in the amount of $300k.
3. Sneakily, Bob accepts both mortgages, and each bank is not aware of the other bank's mortgage.
4. Bob gets both mortgages, and uses $500k of the $600k received to purchase the home, and pockets the additional $100k.
5. Bank A's mortgage contract date is 01/01/14, and recording date is 01/10/14.
6. Bank B's mortgage contract date is 01/02/14, and recording date is 01/09/14 (earlier thank Bank's recording date).
What happens in this case? Which lien gets priority? Both banks did not receive adequate notice of each other's encumbrances.
Can Bank B foreclose on owner, claiming first priority, due to an earlier recording date (but later contract date)?