Legal Question in Real Estate Law in Maryland

I work for a small shop that owns mortgage notes/liens. Our lien was recorded on a property in 1997 as a $35,000 second lien. The borrower was a poor performer, however we were never able to exercise the lien, due to the equity not being there, around 2006, when we considered foreclosing as 2nd lien holder. In 2007 she refinanced her first, without a subordination agreement and discharged her first mortgage (for $76,000) for $104,000. They completely ignored our lien. She is no longer performing on the new $104,000 lien. I spoke to the other lien holder and informed them of our lien, and suggested they treat ours like a senior lien and file a title claim. They are doing just that. My attorney is now saying that in MD, the title company can claim equitable subrogation rights after the $104,000 lien is assigned over to them, when they pay out the claim. Is this true? If so, what is the purpose of a subordination agreement in MD? Why bother with title insurance and this is a fairly crazy standard compared to the rest of the nation. Can a MD real estate attorney comment on the reality of MD equitable subrogation as it relates to these types of issues. My feeling would be that once a title company acknowledges an error and pays a claim, it would be hard to say that the lien, now that it is in their possession, is subject to the rules of equitable subrogation, when they have already acknowledged us as a first lien for the purposes of their clients title claim. Any feedback or case samples you can point me to would be awesome.


Asked on 4/04/13, 3:18 pm

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Equitable subrogation is not automatic. It has to be established by a court. And it is not just MD - many if not most states have it. The theory is that you are not harmed since you knew you were in 2nd position (the refi bumping you to first would have been a windfall), and they thought they were in first. It very much depends on the facts and the court's view of the equities of the situation.

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Answered on 4/05/13, 3:56 am


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