What happens in case of foreclosure regarding junior mortgages?

In the event of a foreclosure, the senior mortgage or lien takes precedence and is paid first from the proceeds of the sale of the foreclosed property. This hierarchy is established because the senior mortgage has a superior claim to the property, meaning it was recorded first and has a priority status over junior mortgages.

When a property is sold in foreclosure, the funds generated from the sale are first allocated to satisfy the obligation of the senior lien holder. Only after the senior mortgage is completely paid off are funds distributed to junior mortgage holders, if there are any remaining proceeds. If the sale does not generate enough money to cover the senior mortgage, junior mortgages may not receive any payment at all, as they hold a subordinate position. This principle is fundamental in real estate finance and is important for understanding the rights and risks associated with different types of mortgage liens.