The world of equitable subrogation in the context of mortgage refinancing was turned on its head when the Michigan Court of Appeals decided Ameriquest Mtg Co v Alton, 273 Mich App 84 (2006). Since that time, in 2008, Michigan’s recording statute was amended. Thereafter, the Michigan Court of Appeals revisited the doctrine of equitable subrogation in mortgage refinancing in CitiMortgage Inc v Mortgage Electronic Registration Systems, Inc., 295 Mich App 72 (2011). In CitiMortgage, the Court concluded that Ameriquest was no longer controlling law and instead adopted a rule that where a senior mortgage lender discharges its recorded mortgage and takes a replacement mortgage as part of the same transaction, the replacement mortgage takes priority over a junior mortgage unless the junior mortgage holder suffers material prejudice.
For a discussion of equitable subrogation you are referred to CitiMortgage and National City Mortgage v Mercantile Bank of America, Michigan Court of Appeals Docket No. 304469 decided July 31, 2012.
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