It can be particularly complicated if there are pledge rights on the ground. Ohio Revised Code Section 1311.14 contains criteria for determining which right to pledge is a priority in construction, repair or renovation situations. The final declaration of this statute provides that the statutes: (1) control all other statutes relating to the mechanic`s pawn rights; (2) must be interpreted liberally for mortgages in the section; and (3) provides that substantial compliance by the mortgage holder is sufficient. In Vasko, the borrower granted a first mortgage to the applicant`s predecessor in 2008. In 2012, the borrower granted a second mortgage to another lender. In 2014, the applicant and the borrower entered into an agreement to amend the 2008 loan and mortgage, reducing the interest rate and monthly payment amount and extending the term of the loan. Lenders considering an amending loan contract should request a review of the title of the property in question to determine if there are other pledges. The Maynard case suggests that even if the title review shows junior pledges, the mortgage priority is not compromised if the amendment agreement simply reduces the amount of the payment or extends the duration. There are many other credit changes based on the circumstances.
For example, the parties may agree that the lender is giving fresh money to modify a previously contracted loan or that they agree to have replacement or additional collateral as collateral for the loan. Is a first mortgage lender at risk of losing its junior credit pledge priority if the lender enters into a credit modification agreement? That depends. The problem became in Bayview Loan Servicing, LLC v. Vasko1 a case that was decided by the Sixth Appellate District of Ohio on January 5, 2018. Thus, in Maynard, if the amendment is simply a reduction in the amount of payment or by extending the repayment period of the loan, the priority of the mortgage is not affected by the amendment, even if there is no subordination contract signed by a junior pawnholder. When considering a loan change, the lender should pay particular attention when the title review reveals a legal right to pledge in the land or if there is evidence that work has been done or that materials have been provided to the property for construction, repair or renovation. If the change adds new guarantees. B, which were not mentioned in the original mortgage, and if the contractor, subcontractor or equipment has not signed a subordination agreement, the lender may have a difficult problem when a mechanic`s pawnbroker raises a priority dispute in a enforcement action.4 However, the priority of guaranteeing a mortgage may be compromised with other types of credit modification contracts.