Lien Position Definition

Many properties, and particularly real estate, may bear multiple liens. For example, a home might have a first and a second mortgage. The lien position describes the order of precedence in which the liens will be executed. If the property is seized and sold to satisfy debts, for example, the debt secured through the first lien must be satisfied before the debt secured through the second lien will be contemplated. For this reason, most creditors will not make loans beyond the position of second or third lien because in these cases the residual security value of the property is, at best, nominal. Generally, a first position lien will be offered at a lower interest rate than a second position lien. Consumers should be aware that even if their property is seized and liquidated, they remain contractually obligated to pay off any deficiency-that is, any remainder of the debt.