By Bradley Songer on November 8, 2010
 A lien is defined as the ability to take another’s property if an agreement is not obliged. This typically means that if a borrower does not oblige his or her part of the deal, paying off their debt at the agreed upon amount and on time, it enables a lender to secure repayment of the loan or debt via the collection of an asset. The specific asset that was put up during the loan process is called collateral and is used to secure repayment of the debt. Once the loan is paid back and the contract is terminated, the lien is removed and the mortgage agency is denied access to the right to the property. Liens are used to reduce the risk of investment so that the borrower pays back their debt.
When a borrower purchases and terminates on a debt or home property, the mortgage lender places a lien on that property. The home property is a secured debt which uses the house as collateral. The lien ensures that the mortgage lender retains ownership of the interest in the property. Since it is the mortgage lending agency that files the first lien on the property, the first mortgage lender is also known as the first lien or first perfect primary lien.
In the housing market, the usual lien is created when the lender of a first mortgage is approved a ‘primary lien’ over the collateral of the aforementioned house. If the borrower does not make payments on time or in the amount specifically agreed upon, the house will be foreclosed and taken back by the first financial institution which issued the loan. Basically, when the home is sold, the lender of the first mortgage agency will acquire their repayment via the collateral of the home before any second or third mortgages or loans.
A lien can be categorized as perfect or imperfect. The first mortgage agency who is allowed primary lien is known as having the perfect lien. This means they have the first right before any other agency to the collateral repayment.
Primary liens are usually contracted with homes within the housing market via a first mortgage loan. A home mortgage is a loan which is provided by a bank or a mortgage company for residential purposes: basically, obtaining a home. It is typical for the home to be taken back by the lender if payments are not made on time. |