AB 188

Under current law, a mortgage on real property creates a lien on the property.

Mortgages may be recorded in the office of the register of deeds of the county in which

the property is located, which gives the public notice of the lien on the property.

Certain duly recorded mortgages have priority over certain other liens on the

property, which means that the lienholder with priority has first right to use proceeds

from the property to satisfy an obligation owed to the lienholder by the property

owner.

This bill specifies that a refinance residential mortgage retains the priority of

the prior (original) first-lien residential mortgage, including priority over any

second-lien mortgage that is created after the original first-lien mortgage, if all of

the following conditions are satisfied:

1. The principal amount of the loan secured by the refinance mortgage does not

exceed the outstanding principal balance of the loan secured by the original

mortgage plus $5,000.

2. The interest rate of the loan secured by the refinance mortgage is stated in

the refinance mortgage at the time it is recorded and, if the original mortgage secures

a fixed-rate loan, does not exceed the interest rate set forth in the mortgage note

secured by the original mortgage.

3. The refinance mortgage is recorded and contains specified information on its

first page.

The bill includes provisions to facilitate the recording and indexing of refinance

mortgages in a way that allows the public to also locate the original mortgages.