MBE Rules · Real Property
Foreclosure and priority
The rule
First in time, first in right — junior interests recorded after the senior mortgage are extinguished by foreclosure of the senior. Senior interests survive. Purchase money mortgage (PMM) takes priority over earlier-recorded judgment liens and after-acquired property mortgages.
In plain English
When a property is foreclosed, the first mortgage recorded usually gets paid first. If someone buys a home with a loan, that loan can sometimes jump ahead of other debts.
Worked example
Buyer takes a loan to buy a house, then later gets a credit card debt. If the house is foreclosed, the home loan gets paid first, even if the credit card company recorded their debt before the home loan.
Memory hook
First in time, first in line. Foreclosure extinguishes junior liens, but senior ones survive. PMM jumps the line over judgment liens.
The trap
Students think: all recorded interests are wiped out in foreclosure. Wrong, because only junior interests are extinguished. The actual test is senior interests survive.
How examiners test it
The MBE loves: foreclosure sale setup with multiple liens. Trap: students forget PMM priority over earlier judgment liens, assuming first-recorded wins.
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