A farmer mortgage on a farm is held by two banks. The first bank forecloses and a third party buys the property. The second bank does not appear at the foreclosure. What is the most likely result regarding the second bank's lien when the farmer repurchases?

• A. The purchaser at foreclosure defeats the second bank's lien.
• B. The second bank is a necessary party and would be able to protect its lien in the sale.
• C. The buyer’s title is subject to the second bank’s lien.
• D. The transaction is fraudulent and voids the sale.

Answer: (A)

When a senior mortgage is foreclosed, liens that are junior and not properly protected or joined in the foreclosure can be wiped out as to the property being sold. Since the second bank did not appear, its lien isn’t preserved in the foreclosure proceeding. The foreclosure sale transfers title to the buyer free from that unprotected junior lien, to the extent the sale price does not cover it. If the farmer later redeems by paying the bid, the title returns to him, and the second bank’s lien has already been defeated by the foreclosure sale.