Bank mortgage holds first priority - that simple. They are after maintaining their position. I think that in a bank foreclosure, the winning bidder, must clear up all other liens (association if it recorded, taxes etc. to town) in order to have a clear title. Bank will likely not write a mortgage for that winning bidder without all other liens released - paid by the high bidder.
HOWEVER, you should ask your own legal adviser to contact LSB's legal department, who will be better informed than a branch/office manager.
AN INTERNET FORUM IS NOT THE PLACE FOR LEGAL ADVICE.
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