In 2005, Tristan McGough borrowed funds from World Savings Bank, obtained a line of credit (“HELOC”) from Citibank, and gave both lenders mortgages in his home. Both lenders recorded their interests. Debtors later refinanced through First Tennessee, who received two mortgages: one for paying off the World Savings mortgage and a second for paying down the Citibank HELOC. However, the Citibank HELOC remained open. First Tennessee National Bank Association later assigned its first mortgage to U.S. Bank National Association. Three creditors filed claims asserted to be secured by the Debtors’ home. These claims, in order of their date of recording, are: (1) U.S. Bank for $176,516.33, (2) Citibank for $52,968.34, and (3) First Tennessee for $15,666.25. The parties stipulated U.S. Bank held a first priority mortgage. This Court previously ruled the value of the Debtors’ home is $190,000. Debtors objected to Citibank’s claim, stating First Tennessee’s mortgage had second priority and Citibank’s mortgage was defective for failing to notarize Lynnae’s signature. The Court found Citibank had a valid mortgage because notarization is required only for perfection, not attachment. Further, Citibank had a perfected security interest even though it failed to notarize Lynnae’s signature. Under Wisconsin statutes, if the recorder’s office accepts a record for filing, the record is considered properly recorded even if it contains errors. Since the Citibank HELOC was never closed and Citibank recorded its interest before First Tennessee, Citibank’s claim had priority over First Tennessee’s.
11 U.S.C. § 506 -- Determination of secured status
Wis. Stat. § 706.02 -- Requirements for a valid mortgage
Wis. Stat. § 706.05 -- Perfecting a security interest