Another Reason To Avoid Second Deeds Of Trust

In Centrum Financial Services v. Union Bank, decided December 17, 2017, the Court of Appeals clarified the limitations on the right of a junior lienholder to cure a default of a senior secured indebtedness. Centrum requires caution and additional preparation when considering whether to foreclose on a second deed of trust.

Frontier Bank had loaned $1,875,000 secured by a two-story office building in Monroe. Subsequently, Centrum Financial Services loaned an additional $1,610,000 secured by a second deed of trust on the same property. Following a default on its loan, Centrum foreclosed, taking ownership of the building following a credit bid. At the time of the Centrum foreclosure, the borrower was already in default on the Frontier Bank loan.