Zack Peyton borrowed $398,000 from Fifth First Bank to purchase a new home. Zack gave First Bank a mortgage on his home. The mortgage was recorded on January 3, 2014. Zack had made a down payment of $42,000. When Zack moved in, he purchased an in-ground swimming pool from Paddock Pools for $35,000. Zack paid Paddock $4,000 and Paddock financed the remaining amount for him, recording a mortgage
for $29,000 on February 26, 2014. Zack needed window coverings, landscape, and some new furniture. Wells Fargo gave Zack a $150,000 home equity line of credit, secured by a mortgage on Zack's home for $150,000. Wells Fargo recorded the home equity credit line mortgage on February 1, 2014. Zack, because of a bonus at work, did not draw on the line of credit until June 10, 2015, using $25,000. The economy went south somewhere around September 2015. The value of Zack's home dropped by almost 50%. Zack lost his job. He could no longer make his payments. Fifth First Bank served Zack with a notice of foreclosure on November 1, 2015. ?When the foreclosure takes place, who has priority in the distribution of the funds?
A)?Wells Fargo
B)?Paddock because it was a creditor for improvement to the property and takes priority over the original mortgage lender
C)?Fifth First Bank
D)?Because they are all mortgages, they are on equal footing and there will be a pro rata distribution
C
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