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 by which a Federal Tax Lien concern would ever be more than a existing home loan. Although we thought that as a matter of general public policy that the Federal Tax Lien concern never would, we thought it had been a fantastic chance to talk about federal income tax liens and just how it works pertaining to formerly recorded liens and mortgages.

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

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

Possibly that does not assist much, so think about liens a a deck of cards. The Ace could be the greatest. That could be very first home loan. In the event that you have 2nd home loan, that 2nd home loan is the King. In the event that IRS filed a federal income tax 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. In a court if they are not, they want to be able to recover what is owed to them. Priority liens are compensated when you look at the purchase which they had been filed regarding 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 proceeds in a court circulation of foreclosure proceeds. Therefore, concern is a must.

In the event that Ace desires to foreclose, the Ace gets reduced in complete before other people does. Then tough luck for them if there is no money left for the King, Queen and Jack after the Ace forecloses.

The tutorial is, you want to be the Ace if you are loaning someone money. Leggi tutto “Federal Tax Lien Priority: Over Your Mortgage?”