Zack Peyton borrowed $398,000 from Fifth First Bank to purchase a new home. Zack gave First Bank a mortgage on his home. The mortgage was recorded on January 3, 2020. Zack had made a down payment of $42,000. When Zack moved in, he purchased an in-ground swimming pool from Paddock Pools for $35,000. Zack paid Paddock $4,000 and Paddock financed the remaining amount for him, recording a mortgage for $29,000 on February 26, 2020. Zack needed window coverings, landscape, and some new furniture. Wells Fargo gave Zack a $150,000 home equity line of credit, secured by a mortgage on Zack's home for $150,000. Wells Fargo recorded the home equity credit line mortgage on February 1, 2020. Zack, because of a bonus at work, did not draw on the line of credit until June 10, 2021, using $25,000.
The economy went south somewhere around September 2021. The value of Zack's home dropped by almost 50%. Zack lost his job. He could no longer make his payments. Fifth First Bank served Zack with a notice of foreclosure on November 1, 2021.
-Suppose that the fact pattern is changed slightly and prior to the economy going south, Zack sold his home to Melanie Knight for $450,000. Melanie paid Zack $52,000 and assumed the Fifth First Bank mortgage. The property was transferred subject to the Paddock mortgage but Melanie did not agree to assume the payments on the pool. Zack failed to make the payments on the Paddock Pool. Paddock has begun foreclosure proceedings on the home.

Question

Quizplus · Accepted Answer

Paddock has the right to foreclose on its mortgage because the mortgage was properly recorded, creating a lien on the property regardless of the property's subsequent sale and whether the new owner agreed to assume the loan. The priority of mortgages is determined by the order in which they are recorded, not by the owner's personal agreements.

Zack Peyton Borrowed $398,000 from Fifth First Bank to Purchase