MTC Financial v. Nationstar

Court Holds That the Order of Recording Does Not Establish Priority


In MTC Financial, Inc. v. Nationstar Mortgage, a California appellate court recently held that the order of indexing two (2) simultaneously recorded deeds of trust against the same parcel of property was not determinative of priority.  In MTC, a borrower obtained two (2) loans from Countrywide Home Loans, Inc.  One was a primary loan and the other was a home equity line of credit.  Both deeds of trust were recorded with the recorder’s office.  The deed of trust for the equity line was recorded first.  Subsequently, there was a foreclosure sale and a dispute between the lenders as to priority.  Because the equity line of credit was transferred to another lender, there was a dispute as to which loan took seniority.  The trial court held and the appellate court agreed, that although the larger loan was recorded second, it took priority.  The court relied upon the apparent intent of the parties to determine the priority of the two (2) loans.  The court held that given that Countrywide was the lender on both loans, the reasonable expectation was that it would secure the larger mortgage loan in the primary position and the equity line in second position.


Shannon B. Jones, Partner