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What does a lender in first position have to be concerned with regarding 2nd lien holders?

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Question: What does a lender in first position have to be concerned with regarding 2nd lien holders? Why would they not want to negotiate with the Owner until the 2nd lien holder goes away?

 

Answer: 

Nothing… they are in first position.  However, the lender in first position wants to get paid in full.  They don’t like it if they discount the loan and money also gets paid to the 2nd.  They also understand in most cases the 2nd won’t settle for nothing.  So sometimes they will actually tell you what they will allow the 2nd to receive as a payoff if the 1st agrees to accept a discounted price.

We own property in Idaho. If we “walk away” from the Idaho property, can they garnish our wages?

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Question: We own property in Idaho through an interest only loan. We had planned to sell our home in California this year and pay off the land in Idaho with the money from the sale. Now the California house is worth less than we owe on it and we are stuck with an interest only loan on property in Idaho. If we “walk away” from the Idaho property, can they garnish our wages for the amount of the loan?


We have an interest only mortgage on a house…

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Question: We have an interest only mortgage on a house that is now worth about half of what the the mortgage is. We have not missed a payment and there is a penalty to refinance. What is the best way to handle this situation.
Frank in Florida.

Answer: This seems to be the ongoing trend these days…houses worth a lot less then the mortgage. Unfortunately, even if you threaten them you’re going to foreclose, they typically want you to “prove it” or show them your hardships for needing help. Only after you stop making payments to they become motivated to do something. But then your credit has been hit and refinancing becomes very tough to do. So then you try a loan modification and still it’s not 100% your lender will do a modification. So I guess you need to weight out what it’s going to cost you in penalties and fees to refinance and see how long you need to stay in your home at the new interest rate to make it worth your while. My guess is that it could be 6 -10 years before you even hit a break-even point depending on your penalties.

I own a home in Southern California. I bought the home using my VA benefits.

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Question: I own a home in Southern California. I bought the home using my VA benefits. I am 3 months behind in my mortgage. It doesn’t look like the mortgage co. (Countrywide) is going to modify the loan so that I may keep it, already contacted HUD and they sent a modification proposal to Countrywide 30 days ago but Countrywide has yet to receive it. My question is, I owe $64,000 on a Home Equity Line of Credit I got through Washington Mutual Bank on the house. If Countrywide forecloses, do I still owe the Equity Line of Credit? Will Washington Mutual come after me for the money? I owe $220,000 on the house, it was just appraised at $175,000. Thank you.

Answer: – California may be one of the few states where they don’t come after you for a deficiency judgment. If your home is foreclosed on, typically they will 1099 the borrower for the amount they lost. However, VA loans have special exceptions. With VA loans, I believe they may have the right to come after you for the deficiency judgment. You may want to check with an attorney in California on this, but it seems like that’s what I remember.

Private investor holding a lien, how do we foreclose?

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Question:  We are the mortgagee of a property in Michigan though we live in another state. The mortgagor who in turn is renting the house to somebody has stop paying us. We are in the process of foreclosing the house. My questions are:

1) In the Mortgage contract, it states that “we, the mortgagee have the right to foreclose the property just by posting an advertisement on the newspaper”. I do see in your Michigan Foreclosure Law that, we need to include a Power of Sale which permits the property to be sold by public auction. Do we have a right to just foreclose the property but NOT sell it to the public via auction since it will be sold for so much less? We are planning to sell the property thru a real estate broker after the foreclosure. Or is the Public Auction Sale Mandatory if the foreclosure is only thru advertisement?

2) Can we as the mortgagee purchase insurance for this property? We’re worried what if something happens to the house then we’d totally be zeroed out. I’ve ask State Farm and was informed that since we do not live in Michigan, we cannot purchase insurance. Can you please suggest where we can purchase Mortgagee insurance. I know banks are able to do this but for us individual investors, what are our recourse? Can you name some company around Michigan state?

3) What happens if the mortgagor files for bankruptcy, can we still get our property back since we are the only mortgagor and since he is not using this property as his primary residence but is renting it out?

ANY HELP/ADVISE WILL BE GREATLY APPRECIATED. THANKS!

Answer:

  1. Yes you can foreclose on this property and if someone actually bids, they will pay full price for the home.  If no one bids, like you are assuming, then you take back the property in which you already own.  It might be easier if you can just get him to “deed” the property over to you so you can avoid the whole foreclosure process, which is very time consuming.  Then he can avoid “foreclosure” on his credit report as well.  It would be a win for him… and you I guess in way because now you can list the home faster.
  2. This is something you’ll have to research more in your local area.  Most banks require homeowners to have insurance in the event of a catastrophe so they can rebuild the home.  So it can be done.  This is your asset, you need to protect it just like anything else of value…
  3. If he files bankruptcy, then he will either keep the home and continue his payments to you or list the home in the bk and the home goes back to you.  Again, if you can get him to just deed it back to you “deed in lieu” it will save everyone a lot of time, headache and money.  Then everyone can get on with their lives.

If my home goes into foreclosure what happens to my Home Equity Line of Credit?

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Question: I live in Idaho. If my home goes into foreclosure what happens to my Home Equity Line of Credit that is attached to the value of the property?

Answer: -Your home equity line of credit (HELOC) gets wiped out if no one bids. Then, typically your 2nd lien holder will 1099 you or file for a deficiency judgment. It’s more common to receive a 1099.