In order to understand what a mortgage lien is, you must first understand what a mortgage is. A mortgage, also known as a mortgage loan, is a legal document that is utilized by buyers of real property in order to secure funds to buy real property. When a buyer executes a mortgage to borrow funds to buy or refinance real property they give the lender, typically a bank, a real estate lien on their property. This means that if the buyer then does not repay their mortgage loan in accordance with the terms of the loan, the lender has the right to take back the property.

For example, if a buyer borrows money from a bank in order to purchase a home, but then misses months of payments on the loan, the bank may then initiate a mortgage lawsuit against the homeowner to recover the property.

There are numerous reasons in which a homeowner may fall behind on their loan payments. Because of this, mortgage lawsuits between lenders and homeowners are fairly common in the United States. As mentioned above, mortgage lawsuits often result in the homeowner losing their home, while the mortgage lender loses the mortgage and interest payments from the homeowner.

The reason that homeowners lose their property is because mortgage lawsuits result in the lender being granted a mortgage lien on the property, which then allows them to take the homeowner’s property to satisfy the terms of the loan. Because of the complexity of mortgage loans, mortgage lawsuits are often complicated legal proceedings.

It is important to note that mortgage liens may also be referred to as real estate liens or property liens. Further, in addition to the borrower imposing a lien on a borrower’s property, the court may also impose a lien on the property. If the court imposes a lien on real property, the lien is known as a “judicial lien,” and oftentimes judicial liens are difficult to challenge. Examples of judicial real estate liens include construction liens and tax liens.

What Is the Difference Between Voluntary and Involuntary Real Estate Liens?

As mentioned above, a mortgage lien is a legal right or interest against a piece of real property that is held by a lender. In property law, there are two main types of real estate liens: voluntary and involuntary.

Mortgage liens fall into the voluntary real estate lien category. In short, voluntary liens are liens that are created voluntarily by contract between a lender and a borrower. Mortgage loans are the most common type of voluntary lien, as the borrower executes a contract giving the lender a legal right in the property they are borrowing money to purchase.

It does not matter if you live in a title theory mortgage or lien theory mortgage state, the lender retains true ownership of the real property purchased with a mortgage loan, until the buyer pays off the loan. Once the buyer pays off the loan, they then gain full ownership of the property, as the mortgage lien on the property is removed by the lender.

Sometimes liens are not voluntarily created by a homeowner, but rather liens are involuntarily imposed on the homeowner by a federal, state, or local court. As mentioned above, courts may impose a judicial lien on a homeowner’s property. Although most judicial liens involve a lender enforcing their mortgage lien, other common judicial liens include tax liens and construction liens.

Construction liens, also known as a mechanic’s lien, occur when a borrower fails to pay for the renovations or improvements done on their property. In such cases, the contractor can file a lien on the property until the payments are made in full for their work. In addition to contractors, subcontractors that were not paid by the contractor or homeowner in full, may also file a construction lien on the property.

Tax liens are liens that are imposed on a homeowner’s property for failure to pay taxes either federally, or more commonly, property taxes. Failure to pay property taxes or federal taxes may result in the court imposing a tax lien on your property. Thus, it is important to remain current on all federal and state tax payments.

Other involuntary liens that may be imposed on a homeowner’s property include child support liens and civil judgment liens. Child support liens occur when an individual fails to timely make child support payments. The person entitled to child support may then get a court to impose a lien on the property of the parent required to make support payments. Judgment liens are simply liens that an individual may place on the real property of another individual in order to secure payment for the lawsuit that they won against that individual.

Is It Possible to Remove a Lien From My Property?

Once again, if there is a lien on your property, then the title to your property will be considered “clouded,” and it will likely be difficult to sell your property. Buyers of property often inquire as to whether the seller has a clean title to the property. In order to convey a clean title to a buyer, there cannot be any liens on the title. When all of the lienholders on a property release their liens, then a clean title will be created and the owner of the property will have full legal ownership. Thus, as a borrower it is important to remove any liens imposed on your property.

There are many different ways in which a borrower can contest or remove a lien from their property, including:

  • Paying off All Loans: It may be simple, but a borrower can remove liens on their property by simply paying off all of the lienholders. Borrowers can also negotiate with the lienholders by sending settlement letters, or negotiating payment of the lien;
  • Filing Bankruptcy: As a borrower, if you are unable to make your mortgage payments, even with refinancing, filing for bankruptcy may be an option to consider. Bankruptcy may wipe out your mortgage loan, but will cause you to lose your house, as the lender will still have their right to foreclosure; or
  • Filing a Lawsuit: If you believe that a lien placed on your property is invalid, then contesting the lien by filing a lawsuit against the lienholder is also an option. If the court determines the lien to be invalid, then the lien will be removed from your property. 

Do I Need an Attorney for a Mortgage Lien Dispute?

As can be seen, mortgage lien disputes are serious and complex legal matters. Therefore, if you are involved in a mortgage lien dispute, it is in your best interests to consult with a well qualified and knowledgeable real estate attorney in your area. An experienced real estate attorney can advise you of your best legal course of action in regards to your mortgage and real property. Additionally, they can also represent you in court, as necessary.