Just got the prelim title search for a property, the owner has a recorded federal tax lien on early June 2007, that lien is attached to his property, around $110k and he obtain a mortgage by refinance his property( property is previous paid off), the mortgage is signed by the End of Jun 2007, recorded by early July 2007. The house worth close to 1 mil. And the loan that issue is $570K.
My question is , how can the lender issue mortgage while there is a big tax lien attached on the property? someone told me it could be possible, because that 's right on the peak of bubble.
I did some research say, there is something call " certificate of subordination of federal tax lien", once the lender obtains this, the mortgage company get the senior position of the liens and they will issue the loan.
I want to know how to find out the truth.
Any lein holder can subordinate their position to a new senior lien. Federal liens can also jump other 1st liens and become senior liens if they need to in an effort to collect on the debt owed. In this case, the lender likely figured they would cure the lien if they had to in the event of default by the owner, to protect their ability to foreclose and sell the asset to recoup their loan amount and fees. There is sufficient equity at the numbers you shared to do so.
When the owner of record (with the tax lien) sells the property, the tax lien will be satisfied from the proceeds of the sale from escrow, prior to the seller receiving any of the sale proceeds.
@Lillian Shi is it a bank loan or private lender?
The bank could have done their title search just before the lien was recorded, then closed later without updating the title search.....or they could be aware of the lien but due to the equity, made the loan anyway. Other than just your own curiosity, it doesn't't matter to you of course, they both have to get paid off at closing, no matter which was recorded first.
It is bank own
@Lillian Shi I have not heard of bank willing to give a mortgage if taxes are owed. Tax liens trump all others type of liens (the government likes to collect). Unless there was an agreement with the cash out to be used to payoff the federal lien, I doubt that any bank would give a mortgage. Maybe the tax lien has been paid, but no one updated the records. On another note, I do know of other companies that will fund properties or businesses even if taxes are owed. They are basically a bank. I am not sure how big the company is, but in central PA I know "Community First Fund" will give loans w/ higher interest to people or companies that do not qualify for a traditional bank loan. I believe is company is also government back, but I could be wrong.
In the end, like @Wayne Brooks mentioned, all liens will need to be satisfied before the property can be sold. I wouldn't waste too much time pondering what's going on unless you think there is a potential deal.
I bought it from sheriff sale, the prelim title search showed there is a payroll tax lien recorded one month earlier than the mortgage note. There's why I have the question. The mortgage has been assigned many times since then.
@Lillian Shi Then it is not a bank owned, and well then yeah, you just inherited the IRS lien on your property. Obviously, you would have wanted to know this prior to buying. Until, and if, you can negotiate something to get this removed, you likely won't be able to get a loan on it.
@Lillian Shi I think I am confused by the question. I'm assuming you knew about the lien before you purchased the property. Does it matter if a bank gave a mortgage despite a tax lien? Are you trying to figure out if you are responsible for the lien or are you hoping since the bank gave a loan on the property the tax lien should have been satisfied?
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