On May 1, 2018, Cynthia Hendrix bought her home and First Bank recorded its mortgage. On June 24, 2020, Cynthia sold her home to Stanton Gulbrandsen for $250,000. At that time, Cynthia's mortgage was $225,000. Stanton assumed Cynthia's mortgage and gave Second Bank a second mortgage for $225,000. Second Bank did not record its mortgage. On October 12, 2020, Stanton sold the home to Derek Bolger for $275,000. Bolger took the property subject to the previous mortgages and executed a $275,000 mortgage to Third Bank. Third Bank recorded its mortgage on October 18, 2020. Third Bank knew of the Second Bank mortgage.
-In a race-notice state, which mortgage company has priority?

Question

Quizplus · Accepted Answer

CIn a race-notice jurisdiction, the priority of a mortgage is determined by who records their interest first, provided they did not have actual notice of a prior unrecorded interest at the time of recording. First Bank, having recorded its mortgage when Cynthia bought the home, clearly has priority over all others due to being the first to record. Third Bank, despite knowing of the Second Bank's mortgage, recorded its mortgage before Second Bank did. Therefore, under race-notice principles, Third Bank gains priority over Second Bank because it recorded its interest first, even though it had actual knowledge of the Second Bank's prior unrecorded mortgage. Second Bank loses priority by failing to record its mortgage.

On May 1, 2018, Cynthia Hendrix Bought Her Home and First