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Mortgagee and Junior Lienholder Redemption from Tax Sale

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Mortgagee and Junior Lienholder Redemption from Tax Sale

Cross-jurisdiction doctrine page. Legal information, not legal advice. Last verified: 2026-06-10.

What it is

When a property is sold at a tax sale, a mortgagee (the lender holding a recorded mortgage on the property) and other junior lienholders (judgment creditors, second mortgage holders, HOA assessment lienholders, etc.) face a fundamental risk: if the tax sale extinguishes their interest and the property is not redeemed, their lien disappears with the former owner’s title. The mortgagee/junior-lienholder redemption right is the statutory or judicial mechanism by which those parties — not just the owner — may redeem the property from a tax sale in order to preserve or recover their security interest.

The doctrine operates at the intersection of three distinct legal bodies:

  1. State redemption statutes — most define who may redeem using language broader than “the owner,” expressly or impliedly including mortgagees and lienholders.
  2. Federal due process notice doctrine — the Fourteenth Amendment requires that mortgagees of record whose addresses are reasonably ascertainable receive actual (mailed) notice before their interest can be extinguished at a tax sale (Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983)).
  3. Federal tax-lien law — the IRS holds its own 120-day redemption right after any tax sale of property subject to a federal tax lien (26 U.S.C. § 7425(d)).

A mortgagee that fails to redeem loses its lien just as the former owner loses title — but only if the mortgagee received constitutionally adequate notice. Without that notice, the sale may be void, or the mortgagee may retain an independent redemption window regardless of whether the general statutory period has run.

Why it matters to each audience

▸ For Investors / Operators A tax-sale purchaser who bids at auction cannot safely assume that the winning bid terminates all prior mortgage and lien interests. Mortgagees and junior lienholders who did not receive constitutionally adequate notice (due-process-notice) retain the power to attack the deed or redeem, sometimes years later. The notice file — who was mailed what, when, and whether it was returned — is the single biggest mortgagee-redemption risk variable. A noticed mortgagee that does not exercise its redemption right during the statutory window loses its lien; an unnoticed mortgagee may not. Confirm the notice chain at every level before counting on a clean title.

▸ For Former Owners If the mortgagee or other lienholder exercised its own redemption right after your property was sold, the redemption inures to or benefits you as the owner (in most states), but the lienholder typically receives a first lien on the property for the amount it paid to redeem. Separately, if your mortgage servicer was never notified of the tax sale, the sale may have been constitutionally defective — a potential ground to set the deed aside under due-process-notice in a timely proceeding.

The governing federal framework

Mennonite Bd. of Missions v. Adams (1983) — the constitutional floor

The foundational rule is Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983). In Mennonite, the Mennonite Board of Missions held a recorded mortgage on Indiana property. The county conducted a tax sale following notice by publication and posting — and mail only to the property owner. Mennonite did not learn of the sale until after the two-year redemption period expired, by which time its $8,237.19 security interest had been extinguished.

The U.S. Supreme Court held that Indiana’s notice scheme violated the Due Process Clause of the Fourteenth Amendment. Key holdings:

  • A mortgagee holds “a substantial property interest” that a tax sale “immediately and drastically diminishes” and can “ultimately eliminate” entirely.
  • When a mortgagee’s “name and address are reasonably ascertainable from the public record, constructive notice by publication and posting, and notice only to the property owner, are insufficient under the Due Process Clause.”
  • The state must provide notice by mail or other means as certain to ensure actual notice — constructive/publication notice alone does not satisfy due process when the mortgagee is identifiable from recorded instruments.
  • There is no duty on the mortgagee to self-protect by independently monitoring courthouse postings; a party’s ability to safeguard its interests does not relieve the state of the constitutional requirement.

Source: Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706 (1983); https://www.law.cornell.edu/supremecourt/text/462/791 (retrieved 2026-06-10).

Mennonite thus sits alongside mullane-v-central-hanover (339 U.S. 306 (1950)) and jones-v-flowers (547 U.S. 220 (2006)) as the third pillar of the federal due-process notice trio in tax-foreclosure cases. See due-process-notice for full treatment.

Remedy when Mennonite notice was absent. The Supreme Court reversed and remanded; it did not specify the exact remedy but established that a mortgagee who lost its lien without constitutionally adequate notice has a viable due-process claim. In practice, state courts have treated the defective-notice sale as void or voidable, meaning the mortgagee’s lien may survive or a new redemption window may be available. The specific remedy depends on state law and the timing of the challenge. See also quiet-title-after-tax-sale, void-vs-voidable.

Federal tax lien — 26 U.S.C. § 7425(d)

The IRS holds an independent 120-day redemption right at any tax sale of property encumbered by a federal tax lien. Under 26 U.S.C. § 7425(d), “the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.” The sale must have been made to satisfy a lien with priority over the federal tax lien, and the IRS must have received at least 25 days’ pre-sale written notice under § 7425(b)(1). If the IRS was not given the required notice, the sale does not discharge the federal lien — the buyer takes subject to it. Source: https://www.law.cornell.edu/uscode/text/26/7425 (retrieved 2026-06-10). See also irs-redemption-right, federal-tax-lien-redemption.

The state-law landscape

The rule across most jurisdictions: any person with a legal or equitable interest in the property may redeem — not just the owner-debtor. The degree to which this is explicit and the notice mechanism that triggers or preserves the right vary significantly by state.

Who may redeem — the statutory class

PatternStatesControlling authority (representative)
Explicit: “any person having any right, title, or interest in or lien upon” the propertygeorgia, new-jersey, arizona, indiana, south-carolina, connecticut, tennessee, rhode-islandGA: O.C.G.A. § 48-4-40 (“any person having any right, title, or interest in or lien upon”); NJ: N.J.S. 54:5-54 (expressly names “mortgagee”); AZ: A.R.S. § 42-18152/42-18151 (“any person who has a legal or equitable claim in the property”)
“Any person entitled to redeem” (broad judicial construction to include lienholders)ohioR.C. 5721.25; in-re-foreclosure-of-liens-2014 (2014-Ohio-3656): Ohio Supreme Court held mortgagees are “entitled to redeem” in tax foreclosure — broader than mortgage-foreclosure statute which limits redemption to “the debtor”
Mortgagee may redeem only with prior annual request for noticeindianaIC 6-1.1-24-3(b); m-and-m-investment-group-v-ahlemeyer-farms (994 N.E.2d 1108 (Ind. 2013)): annual-request condition for pre-sale mailed notice does not violate due process
Owner and “prior outstanding tax lien certificate” holders; mortgagees by “having interest”new-jerseyN.J.S. 54:5-54 (expressly lists “mortgagee” and “holder of any prior outstanding tax lien certificate”)
Purchaser must affirmatively notify mortgagee; 3-month mortgagee window after actual noticemaine36 M.R.S. § 1076 (purchaser must notify mortgagee within 60 days by registered letter; mortgagee may redeem within 3 months of actual notice); 36 M.R.S. § 943 (mortgagee’s 3-month post-actual-notice window after the 18-month lien-certificate period)
Any person claiming an interest (broad; mortgagees implicitly included)michigan, minnesota, colorado, wyoming, mississippiMI: MCL 211.78k (redemption by “any person with an interest” before March 31 after judgment); MN: Minn. Stat. 281.01 (“any person claiming an interest”)
Owner-only statutory text but courts/notice statutes protect mortgageestexas, california, floridaTX: Tex. Tax Code § 34.21 redemption right is owner/mortgagor-focused; FL: Fla. Stat. § 197.502(4)(c) requires notice to mortgagees of record; CA: no post-sale redemption for anyone after close of business day before sale (RTC §§ 3707, 4101)

State-by-state detail

Arizona — A.R.S. § 42-18151 lists the redeemer class as: the owner; the owner’s agent, assignee, or attorney; a person making a charitable payment on behalf of the owner; and “any person who has a legal or equitable claim in the property, including the holder of a tax lien certificate of a different date.” Mortgagees would fall within “legal or equitable claim.” The three-year redemption window runs until a treasurer’s deed is delivered (A.R.S. § 42-18152). Foreclosure of the tax lien requires compliance with civil procedure rules for service, which requires naming all interested persons (A.R.S. § 42-18203). Source: https://www.azleg.gov/ars/42/18152.htm (retrieved 2026-06-10).

Georgia — O.C.G.A. § 48-4-40 is one of the broadest mortgagee-inclusion statutes in the country: “any person having any right, title, or interest in or lien upon such property may redeem it” at any time within 12 months from the date of the sale, and after that until the barment notice procedure under § 48-4-45 cuts off the right. When a lienholder (rather than the owner) redeems, the amount paid constitutes a first lien on the property in favor of the redeeming lienholder (O.C.G.A. § 48-4-43). The barment-notice procedure under § 48-4-45 expressly requires service on lienholders “whose interests appear of record at the time of any attempted foreclosure of the right of redemption.” Source: law.justia.com description of GA §§ 48-4-40, 48-4-43, 48-4-45 (retrieved 2026-06-10).

Indiana — IC 6-1.1-25-4 allows “any person” to redeem before the redemption period expires, which courts and practitioners interpret to include mortgagees and lienholders of record. However, Indiana conditions pre-sale notice on the mortgagee’s own annual request: IC 6-1.1-24-3(b) requires the county auditor to mail tax-sale notice to any mortgagee who “annually requests, by certified mail, a copy of the notice.” The Indiana Supreme Court held in M & M Investment Group, LLC v. Ahlemeyer Farms, Inc., 994 N.E.2d 1108 (Ind. 2013) (reversing the Court of Appeals), that this annual-request condition does not violate the Fourteenth Amendment’s Due Process Clause — effectively creating a self-help notice regime in which a mortgagee that fails to file the request annually bears the risk of tax sale without mailed notice. Practical consequence: Indiana mortgagees lose their pre-sale notice protection if they skip the annual filing, even though mennonite-v-adams would otherwise seem to require mailed notice. Sources: https://caseclips.courts.in.gov/2013/09/27/mm-v-ahlemeyer/ (retrieved 2026-06-10); https://law.justia.com/codes/indiana/title-6/article-1-1/chapter-24/section-6-1-1-24-3/ (retrieved 2026-06-10).

Maine — Maine has a two-layer mortgagee redemption structure. The standard 18-month lien-certificate period (36 M.R.S. § 943) applies to all interested parties after the tax lien certificate is recorded. Separately, 36 M.R.S. § 1076 imposes an affirmative duty on the tax-sale purchaser: within 60 days after the sale the purchaser must send the mortgagee of record notice by registered letter of the sale and request the mortgagee to redeem. If proper notice is given, the mortgagee has 3 months from actual notice to redeem by paying the amount bid plus 8% annual interest plus costs. If the purchaser fails to give the required notice, the mortgagee retains the right to redeem “at any time within 3 months after receiving actual notice” — effectively an open-ended post-sale window that does not close until actual notice is achieved. Sources: https://legislature.maine.gov/statutes/36/title36sec1076.html (retrieved 2026-06-10); https://legislature.maine.gov/statutes/36/title36sec943.html (retrieved 2026-06-10).

Michigan — MCL 211.78k governs the foreclosure judgment that terminates all pre-existing liens. Any person with an interest may redeem on or before March 31 immediately following entry of the foreclosure judgment (or within 21 days in contested cases). Upon the foreclosure judgment becoming final, “all liens against the property, including any lien for unpaid taxes or special assessments” are extinguished and the foreclosing unit obtains fee-simple title free of encumbrances. Interested parties — including mortgagees — receive statutory notice through mail, personal visit, and publication before the foreclosure hearing (MCL 211.78b et seq.). California-style pre-sale only: once Michigan’s March 31 deadline passes, there is no post-sale redemption window for any party. Sources: https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-211-78k (retrieved 2026-06-10).

Minnesota — Chapter 281 allows “any person claiming an interest” to redeem (Minn. Stat. § 281.01). Mortgagees and other lienholders are explicitly identified as parties who must be served notice at least 60 days before the expiration of the redemption period (Minn. Stat. § 281.17 notice-of-expiration procedure). The redemption period does not begin to run until this notice is properly served — meaning a mortgagee or lienholder who was not served retains an open redemption window until actual notice plus the 60-day period. Sources: Minn. Stat. Chapter 281 (https://www.revisor.mn.gov/statutes/cite/281/full, retrieved 2026-06-10).

New Jersey — N.J.S. 54:5-54 expressly names “the owner, his heirs, holder of any prior outstanding tax lien certificate, mortgagee, or occupant” as parties entitled to redeem “at any time until the right to redeem has been cut off.” Redemption remains open until a final court judgment forecloses the lien — a process that in NJ takes two years minimum for non-municipal holders (six months for municipalities) under R.S. 54:5-86. Non-municipal foreclosing plaintiffs must give at least 30 days’ pre-filing written notice to parties entitled to redeem whose interests appear of record. Sources: NJS 54:5-54 (confirmed from law.justia.com/codes/new-jersey/title-54/section-54-5-54/, retrieved 2026-06-10); prior wiki entry for new-jersey.

Ohio — The controlling case is in-re-foreclosure-of-liens-2014 (In re Foreclosure of Liens for Delinquent Land Taxes (Vanderbilt Mortgage), 2014-Ohio-3656, Ohio Supreme Court). The Court held that mortgagees are “persons entitled to redeem the land” under R.C. 5721.25 — the tax-foreclosure statute uses “any person entitled to redeem,” which the Court read as broader than the mortgage-foreclosure statute’s “debtor”-only limitation. Critically, a mortgagee’s redemption right under R.C. 5721.25 exists only before confirmation of the sheriff’s sale; purchasers must account for this when bidding because a noticed mortgagee that has not yet exercised its right retains redemption power until the court confirms. The Fifth District Court of Appeals had previously held (2013-Ohio-1400) that a mortgagee with actual notice and opportunity to bid but who chose not to bid on the land could not later use R.C. 5721.25 redemption to undo the sale — the Ohio Supreme Court’s 2014 reversal is the controlling authority. Sources: http://www.courtnewsohio.gov/cases/2014/sco/0902/130713.asp (retrieved 2026-06-10); https://codes.ohio.gov/ohio-revised-code/section-5721.25 (retrieved 2026-06-10).

Texas — Tex. Tax Code § 34.21 confers the redemption right on “the owner” of certain property categories (homestead, agricultural, mineral interests). The statute does not expressly extend the redemption right to mortgagees as independent redeemers (unlike NJ or GA). However, Texas law requires that a person purchasing a tax lien transfer must notify any mortgage servicer and each holder of a recorded first lien within 10 business days (Tex. Tax Code § 32.06 and related provisions). Whether a Texas mortgagee can independently exercise the § 34.21 redemption right (as opposed to helping the owner do so) is needs_verification — the statutory text focuses on the “owner” as redeemer. Sources: search-confirmed text of § 34.21 at https://lonestarlandlaw.com/redemption-issues-for-investors/ (retrieved 2026-06-10); general statutory description confirmed from statutes.capitol.texas.gov index.

Florida — Florida has no post-sale redemption for any party once the tax deed is issued (Fla. Stat. § 197.472(1): right to redeem ends before the tax deed issues). The pre-issuance redemption right is broad — any person may redeem a tax certificate at any time after issuance and before deed issuance. Fla. Stat. § 197.502(4)(c) requires the clerk to give mortgagees of record advance notice of the tax deed application (by mail if an address appears on the recorded mortgage or if the mortgagee has designated an address with the Department of State). After a tax deed sale, prior lienholders must file a notarized surplus-claim within 120 days of notice or their interest in surplus funds is barred (Fla. Stat. § 197.582). Sources: https://www.leg.state.fl.us/statutes/index.cfm?URL=0100-0199%2F0197%2FSections%2F0197.502.html (retrieved 2026-06-10).

Effect of redemption by a lienholder (who gets the benefit?)

When a lienholder (not the owner) exercises the redemption right, jurisdictions differ on whether the redemption “inures” to the owner or creates new rights in the redeeming party:

EffectStatesNotes
Redemption creates a first lien in favor of the redeeming lienholdergeorgiaO.C.G.A. § 48-4-43: amount paid to redeem “shall constitute a first lien on the property” in favor of the redeeming creditor/person.
Title restored to owner; redeeming mortgagee’s mortgage revivesMajority rule (general principle)Redemption restores the status quo ante; the owner’s title is reinstated, which means the mortgage that was at risk also revives. This is the doctrinal baseline absent contrary statute. [needs_verification — no single retrieved primary source confirming this as a universal rule; individual state law controls.]
Mortgagee who redeems steps into the tax lien positionnew-jersey (subrogation)[needs_verification — NJ subrogation doctrine in this context not independently verified against a primary case or statute.]
Pre-confirmation: sale set aside; title revertsohioUnder R.C. 5721.25, a timely redemption before confirmation means the confirmed sale never occurs and the previous title/lien posture is restored.

Notice as the condition for extinguishment

The critical practical point: in nearly every jurisdiction, a mortgagee’s interest is extinguished by a tax sale only if the mortgagee received constitutionally adequate notice under Mennonite. If the notice was deficient:

  • The sale may be void (see void-vs-voidable, due-process-notice).
  • The mortgagee’s lien may survive the tax sale and attach to the tax deed title.
  • A new redemption window may open from the point of actual notice.

States that require the purchaser to affirmatively notify the mortgagee (Maine, and some others) effectively make the purchaser responsible for triggering — and closing — the mortgagee’s redemption window. A purchaser who skips that notice step retains indefinite vulnerability.

How jurisdictions diverge — summary table

FeatureStates (examples)Notes
Mortgagee expressly named as eligible redeemernew-jersey, georgia, maine, indiana (by implication)NJS 54:5-54; O.C.G.A. § 48-4-40
Mortgagee eligible by “any person with an interest” languageohio, arizona, michigan, minnesota, connecticut, rhode-island, south-carolinaBroad statutory language; judicial construction includes lienholders
Owner-focused redemption statute (mortgagee eligibility unclear or indirect)texas, california, north-dakotaTX: § 34.21 owner-focused; CA has no post-sale redemption at all
Mortgagee notice conditioned on annual requestindianaIC 6-1.1-24-3(b); M&M v. Ahlemeyer (2013)
Purchaser affirmatively must notify mortgageemaine36 M.R.S. § 1076
Mortgagee redemption window runs from actual notice (not sale)maine3-month window from actual notice under § 1076/§ 943
No post-sale redemption for any partyflorida, california, michigan (effectively)FL: deed bars all; CA: pre-sale only; MI: March 31 deadline is effectively post-sale but pre-deed
Mortgagee redemption inures to owner / creates lien in lienholdergeorgia (creates first lien), most others (restores owner title)O.C.G.A. § 48-4-43

Leading cases

  • mennonite-v-adams — A mortgagee of record is entitled to actual (mailed) notice before a tax sale can extinguish its interest; publication/posting alone is constitutionally inadequate (462 U.S. 791 (1983)).
  • m-and-m-investment-group-v-ahlemeyer-farms — Indiana’s annual-request condition for mortgagee pre-sale notice does NOT violate due process (994 N.E.2d 1108 (Ind. 2013), reversing Court of Appeals).
  • in-re-foreclosure-of-liens-2014 — Ohio mortgagees are “persons entitled to redeem” in a tax foreclosure under R.C. 5721.25, and may redeem before confirmation of sale (2014-Ohio-3656, Ohio Supreme Court).
  • mullane-v-central-hanover — Notice “reasonably calculated” to apprise interested parties; the baseline constitutional standard (339 U.S. 306 (1950)).
  • jones-v-flowers — Returned certified mail obligates the state to take additional reasonable steps; applies equally to mortgagee notice scenarios (547 U.S. 220 (2006)).

Practical playbook

For a mortgagee / lender monitoring collateral

  1. File the annual request in Indiana (IC 6-1.1-24-3(b)) and analogous jurisdiction- specific registration forms. Do not rely on the county to find you from the mortgage index alone if a statute conditions notice on affirmative request.
  2. Monitor property tax payment independently. Most commercial servicers escrow taxes, but junior mortgagees and non-institutional lenders often do not. A tax-sale notice arriving after the sale is already too late in many states.
  3. After learning of a tax sale, immediately determine whether the general redemption period is still open (check the jurisdiction’s Module 2 on the state page) and whether you received constitutionally adequate notice. If notice was deficient, preserve the challenge before the tax deed issues.
  4. Redeem before confirmation in Ohio (R.C. 5721.25). The Ohio window closes at court confirmation of the sheriff’s sale — do not wait.
  5. In Maine, if you are the mortgagee and the purchaser has not mailed you the 60-day registered-letter notice under § 1076, your redemption window has not started running. Seek actual notice to start the clock.
  6. Tender the correct amount. The redemption amount typically includes delinquent taxes, interest, penalties, costs, and (in redeemable-deed states) a statutory premium. Confirm the exact figure with the county treasurer or clerk before tendering — a deficient tender generally does not redeem.
  7. Seek subrogation or lien-position analysis post-redemption. When a mortgagee redeems, the post-redemption lien structure depends on state law. In Georgia, the redeeming lienholder holds a first lien; elsewhere the owner’s title and original mortgage revive. Confirm with local counsel before assuming priority.

For tax-sale purchasers assessing title risk

  1. Check for recorded mortgages and other liens in the title abstract before bidding. A property with a known mortgagee of record has redemption risk until notice and the applicable window are both confirmed.
  2. Verify the notice file. Confirm that every mortgagee of record received mailed (actual) notice per Mennonite. If a lender was missed, count on post-sale litigation risk from that lender.
  3. In Ohio, do not close on a tax-deed acquisition until the court confirms the sale. Mortgagees can redeem right up to confirmation, and a late tender by a mortgagee can unwind an otherwise successful bid.
  4. In Maine, if you purchased at a tax sale, send the § 1076 registered-letter notice to each recorded mortgagee within 60 days. Failure leaves your title exposed to mortgagee redemption indefinitely.
  5. Account for the federal 120-day IRS redemption window (irs-redemption-right) whenever the IRS was a recorded lienholder — this window is entirely independent of state law.

right-of-redemption, due-process-notice, mennonite-v-adams, m-and-m-investment-group-v-ahlemeyer-farms, in-re-foreclosure-of-liens-2014, mullane-v-central-hanover, jones-v-flowers, irs-redemption-right, federal-tax-lien-redemption, void-vs-voidable, quiet-title-after-tax-sale, surplus-funds, indiana, ohio, georgia, new-jersey, maine, michigan, minnesota, arizona, texas, florida

Sources

needs_verification

  • Whether Texas Tax Code § 34.21 permits a mortgagee (as distinct from the owner) to independently exercise the statutory redemption right — the statutory text focuses on “the owner” and “mortgage servicer”; the mortgagee’s independent-redemption right under Texas law was not confirmed against a retrieved primary source.
  • Whether, in states using broad “any person with a legal or equitable interest” language (AZ, MN, CO, etc.), unsecured judgment creditors (as distinct from mortgage/lien holders) have the same practical redemption right in tax foreclosure — general statutory text supports it, but no case specifically addressing judgment-creditor redemption at a tax sale was retrieved for those states.
  • The majority-rule doctrinal baseline that “lienholder redemption restores owner’s title and revives the mortgage” — stated as the general rule but not confirmed against a single retrieved primary case in any jurisdiction other than Georgia (which has a distinct first-lien statute) and Ohio (pre-confirmation statutory framework).
  • New Jersey subrogation doctrine: whether a NJ mortgagee that redeems a tax lien is subrogated to the lien’s position or merely revives its own mortgage interest.
  • Arizona: no retrieved source confirmed whether the tax lien foreclosure notice statutes (A.R.S. § 42-18201 et seq.) expressly require personal service on mortgagees and lienholders as “interested parties” — practice appears to require it under civil procedure rules but no primary citation was retrieved confirming mortgagee-specific service requirements.
  • California: the pre-sale-only redemption rule (RTC §§ 3707, 4101) cuts off all parties, not just the owner; whether California provides any post-sale avenue for a mortgagee who did not receive adequate Mennonite notice was not independently researched for this concept page.

Legal information, not legal advice. This page summarizes cross-jurisdiction doctrine and does not constitute legal advice or create an attorney-client relationship. Mortgagee redemption rights, notice requirements, and lien-extinguishment rules vary significantly by state, change over time, and depend heavily on the specific facts of each transaction. Verify every rule against the cited primary source and consult a licensed attorney in the relevant jurisdiction before acting. Last verified: 2026-06-10.

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