Federal Tax Lien Priority: Over Your Mortgage?

Federal Tax Lien Priority: Over Your Mortgage?

by: Anthony Parent

Yesterday, a customer asked us if there have been a situation for which a Federal Tax Lien concern would ever be greater than a current home loan. We thought it was a great opportunity to discuss federal tax liens and how they work in relation to previously recorded liens and mortgages while we believed that as a matter of public policy that the Federal Tax Lien priority never would.

1. So How Exactly Does Federal Tax Lien Priority Work?

A concern lien, after costs and home fees, are liens which have ‘priority under federal law’, such as for instance mortgages along with other secured asset loans.

Possibly that does not assist much, so think about liens a a deck of cards. The Ace may be the greatest. That could be very first home loan. If you have 2nd mortgage, that 2nd home loan is the King. In the event that IRS filed a federal taxation lien, that could be the Queen. Then assume a hospital filed a judgment lien — that might be a Jack.

2. Why do lenders worry about concern?

In other words, lenders desire to be paid back. If they’re perhaps not, they wish to manage to recover what’s owed for them in a court. Priority liens are compensated when you look at the purchase which they had been filed from the land documents. The first lien holder would be paid in full (if possible) and the subsequent lien holders would be paid up to the limits of the available profits in a court circulation of foreclosure profits. Therefore, concern is a must.

In the event that Ace desires to foreclose, the Ace gets paid down in complete before someone else does. Continue reading “Federal Tax Lien Priority: Over Your Mortgage?”