why is it there a senior and junior liens? how they exists?

Answer 1

To explain this as simple as possible, when you buy a home and get a loan for the home, the lender puts a lien on the property. By doing so, the property becomes collateral for the loan. There can be several liens at one time on a single property.

Lien priority is based on when things get recorded. Here is an example situation. We have a 1st mortgage for $250,000 with $15,000 in arrears. This would include all back payments, late fees, attorney fees and all the other fees they tack on. This was recorded 6-20-1999. We have a 2nd for $60,000 with $5000 in arrears. Again this includes the back payments and fees. This was recorded 7-21-1999. If we take a look at this example, we have a 1st mortgage and we can clearly see it was recorded first in 1999. We also have a 2nd who is clearly in 2nd position.

What is senior and what is junior is based upon when you recorded the lien. Whoever records before another would be in "Senior" position and the other would be "Junior". Hence the terms senior or junior lien holders.

Click on the link for a fuller explanation of lien priorities in times of foreclosure.