Escrow & Title
An Oregon property has both a first and second deed of trust. In a foreclosure of the first deed of trust, what happens to the second deed of trust?
AThe second deed of trust remains in place after the foreclosure
BThe second deed of trust is wiped out by the foreclosure of the senior (first) lien✓ Correct
CThe second lender must be paid before the first lender
DThe second deed of trust converts to a judgment lien
Explanation
In a foreclosure of a senior (first) deed of trust, junior liens (second mortgages, junior deeds of trust) that recorded after the first deed of trust are extinguished by the foreclosure. The first lender's foreclosure wipes out junior interests.
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Key Terms to Know
Deed of Trust
A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
DeedA written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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