PROBLEM:

Should the examiner consider later credit extensions on open-ended mortgages given to financial institutions organized in the State of Maine to be prior in interest to subsequent recorded liens?

RECOMMENDATION:

The lien of the open-ended mortgage should be considered prior in interest to a subsequent lien, to the extent necessary to protect the security, or up to the total amount stated in the mortgage, unless the examiner has knowledge or the record indicates that the credit extension on which the prior lien is claimed was granted:

A. After recording by the mortgagor or his successor in interest of a notice limiting the amount secured to not less than the amount actually advanced at the time of such recording; or

B. After notice to the mortgagee by a subsequent lienor that any future optional advances will be junior to the subsequent lien. 9-B M.R.S. § 436, and for mortgages recorded on or after January 1, 1994, 33 M.R.S. § 505.

DISCUSSION:

Note that the statutory provision that provides for the cutting off of the lien priority by the appropriate notice, 9-B M.R.S. § 436, does not apply to mortgages held by private individual mortgagees or out-of-state financial institutional mortgagees, 33 M.R.S. § 505 does not contain a similar limitation.

Please note that the Maine Supreme Judicial Court in Canal National Bank v. Becker, 431 A.2d 71 (Me. 1981) has held that the lien of a mortgage might not necessarily extend to cover future advances, despite a future advances clause in the mortgage document, “unless the advances are of the same kind and quality or relate to the same transaction or series of transactions as the principal obligation secured or unless the document evidencing the subsequent advance refers to the mortgage as providing security therefor.”

First adopted August 25, 1960; amended June 19, 1975 and December 7, 1983, and February 28, 2012.  Formerly Title Standard No. 22.