Junior Lienholders And Cross-Collateralized Loans

Law360, New York (February 12, 2013, 7:10 PM EST) -- The California Court of Appeal for the Second Appellate District recently clarified the rights of junior lienholders who find themselves subordinate to "cross-collateralized" loans.

In R.E. Loans LLC v. Investors Warranty of America Inc., a junior lienholder’s security was wiped out when the senior lienholder declared all sums due under several cross-collateralized loans, which has principal amounts significantly in excess of the amounts that the junior lienholder agreed to subordinate to. The court held that even where a deed of trust is security for multiple loans,...
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