Question: I am in the process of filing for bankruptcy. I am filing chapter 13 so I can have my second mortgage, which is a line of credit through Bank of America, dismissed. My attorney just called and said that because my first mortgage was obtained after my HELOC, only because we refinanced, that the court may deem the HELOC as my first mortgage. Is this possible?
Question: As part of an estate I have a 2nd interest in a mortgage and the 1st mortgagee has now opted to foreclose. Will my interest be paid or do I only get paid if the property sells for more than the first mortgagee is owed?
Answer: -When the property goes to foreclosure, everyone is paid based on lien priority. If you are in 2nd position and the 1st is foreclosing, the opening bid will be the loan amount on the 1st plus a bunch of fees. The only way you’ll get paid is if someone bids more at the auction than the opening bid. Anything above the opening bid will go to whoever is next in priority.
Question: A condominium has gone into foreclosure the lending company has it back. The condominium has a lien on
it the lien was filed against the original owner.
The owner is about to file bankruptcy. Does the lien
stay with the condominium? Can the association still
collect when the property is sold?
Answer: – The foreclosure auction will wipe out any junior liens that are attached to the property if they don’t protect their position. If a judgment or lien was filed against the homeowner, then it will stay with him unless he files bankruptcy, in which in most cases, liens and judgments are wiped out. So no, the association wouldn’t be able to collect. The only liens that don’t get wiped out are the property taxes and IRS tax liens. Those get paid first when the property is taken back by the bank.
Question: If I buy a home at a foreclosure sale, and later determine there is another lien on the home, (other than property tax or Federal) am I obligated to pay that lien to obtain clear title?
Answer: – Yes, if the lien has seniority, you are responsible as the high bidder to pay off all liens to clear title. That’s why it’s so important to run a title report to make sure there are no liens on the property and to find out how many liens are on the property. I’ve heard of cases where individuals will bid on properties thinking they are a great deal and find out later it was the 2nd mortgage they were bidding on and they have to now payoff the first. Most lose their deposit and it goes back up for auction because they thought the opening bid was for the 1st mortgage. Hope that helps.
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?
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.
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!
- 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.
- 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…
- 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.