Also known as: junior mortgage · subordinate mortgages
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage that is subordinate in lien priority to one or more earlier-recorded mortgages on the same real property. The junior mortgagee takes subject to the senior lien and may enforce its security interest only after the senior mortgage is satisfied or through limited remedies such as receivership when the senior mortgage lacks rents or receivership provisions.
Juarez Holdings holds a junior mortgage on an office building owned by Jordan Dynamics. The senior mortgage held by Jones Petroleum contains neither a rents assignment nor a receivership clause. After default, both lenders petition for a receiver. The court grants the request to Juarez Holdings because its mortgage alone authorizes receivership and covers rents.
Jung BioTech obtains appointment of a receiver under its junior mortgage on a leased industrial site. The receiver collects rents, pays taxes and maintenance costs, and applies the balance to the junior debt. When the senior mortgagee later secures its own receiver, the junior receiver retains the net rents already properly applied.
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A junior mortgage is subordinate to an earlier-recorded senior mortgage on the same property. The junior mortgagee may enforce its lien only after the senior obligation is satisfied or through specific remedies such as receivership when the senior mortgage lacks rents or receivership language.
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A junior mortgagee obtains priority for a receiver when the senior mortgage contains neither a rents assignment nor a receivership authorization and the junior mortgage contains at least one of those provisions. This exception applies even if the senior mortgagee petitions later.
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The junior receiver may collect rents until a senior receiver is appointed. It must first apply the rents to taxes and reasonable maintenance and repair expenses. Any excess may be applied to the junior obligation, but uncollected rents and unauthorized prepayments belong to the senior receiver.
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