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.
I’ve put together a very complete and professional short-sale package, and sent copies with all docs to both the 1st and 2nd lien-holders (who are each big lenders). But my problem now is that both say that they cannot accept an offer until THE OTHER gives a commitment letter first. Nobody is willing to go first! What can I do?
This does sound like a problem. Majority of the time it’s always the first who won’t accept an offer unless the 2nd releases the lien. If it’s an FHA loan, one of HUD’s requirements for the short sale is that title must be clear of liens or judgments. So it’s typically the 2nd that “goes first”. You may have to negotiate a little harder with the 2nd. Keep us posted, and let us know what happens.
I recently had a homeowner sign a quick claim for me to purchase the home from the bank, which is already in the foreclosure process. My question is that there is a 1st and 2nd mortgage on the property and I was told that the second mortgage is out their money, is that true? Or are they only out their money if the property goes to the sheriff’s auction>
If you are buying from the owners, you need to take care of the second mortgage. It does not go away.
They are only out their money if they don’t protect their position at the auction or if the highest bid is only enough to pay off the first lien holder. And if the 2nd does not file a deficiency judgment for the loss, then they are out.
A better alternative is to negotiate with the 2nd and get them accept a discount on the loan as payment in full. This is called a short sale. Because you have the advantage most 2nd lien holders will discount their lien up to 90%. So if the 2nd was for $10,000 you could offer $1,000 which would satisfy that 2nd. For more information check out our website.
The jr. lien holder on my loan foreclosed yesterday. They actually bought the house for $65k less than what the loan is owed to them. Can this be done? Second, the Sr. had no idea and the jr. is telling me they own the home to get out. Sr. says no they have no knowledge and have not been paid. I am in Calif. and desperately need help.
The same exact thing happened to me! What happens next is the Sr forecloses but not on the Jr’s Trust Deed. The Sr forecloses on your original deed. How can the Title company transfer title from your name reverting it back to the Sr Lender when the title is now held by the Jr Lender? Why does the Jr Lender get all rights and 100% when their loan may have only been equal to 10% of your Sr Loan? How can the destroyed homeowner be held responsible for the Sr loan yet have no right to possession? Why does a foreclosed homeowner get thrown in with the eviction process set up for tenants yet don’t get the 60 day notice?
When the Jr forecloses, they are suppose to take it subject to meaning they are suppose to pay your loan current. They don’t! The Jr will try to sell it before the Sr forecloses. During that time, you are still responsible for the Sr, your credit is being even more destroyed, and the Jr gets all the equity (I had over $300k).
It’s really ugly. The courts, the attorneys, the title companies, the bankruptcy courts, the Homeowners Associations, the realtors, the lenders, the judges, the investors… DO NOT UNDERSTAND the lien laws. Everyone is running around foreclosing, ordering docs, charging fees, evicting, and throwing us to the curb with a huge bill!
DO NOT LOOSE POSSESSION of your home! Once you are out, it’s basically over.
I am still in my home and I can tell you what I did.
Yes, please tell me what you did or are doing. Nobody, even the attorneys seem to know the law. If I understand correctly, the jr. has to bid at least the amount owed to them at the auction. In my case, the jr. only bid $20k and was owed closer to $90k. This does not make any sense. The Sr. is telling me jr. can’t do that but the jr. states in court unlawful detainer papers that they are the property owners and do not even mention the sr. lien holders. Please help.
y
It is very possible for the 2nd lien to foreclose on a property. The only thing is that they will be responsible for the full payoff of the senior lien. They probably evaluated the property and felt like the property was worth a lot more than what is owed to the senior lien. Taxes liens have been paid off on many properties I dealt with by Mortgagees simply because Taxes are senior to mortgage liens.
Thank you for the reply. I do have a couple of questions if you know the law in California. If the jr. lien holder is the only bidder at the auction, don’t they have to at least bid what is owed to them. The Jr. bid only $20k and they are owed 85k and they have had NO contact with the Sr. nor any attempt to payoff the Sr. or come to an agreement with them as to a payoff amount. They have now served me with eviction papers and in the court docs filed they state that they are the property owners. They do not even mention in docs that they
are the jr. and there is a sr. lien holder. Any help will be appreciated
While this is true, the 2nd lien holder can foreclose, they can also reinstate the 1st and take over the property subject to, that way they don’t have to pay off the first. They have to continue to make payments to the first to keep it current or “pay off” the loan. Investors actually do this all the time so they don’t have to come up with a ton of money. They are taking the risk by foreclosing in hopes someone will bid because they will get paid the full amount. If no one bids, then they continue to make payments to the first. And sometimes, like in your case, the first may not even know it’s going to foreclosure. Then they will try to sell the property.
In court docs the 2nd states they are the prop. owner and do not even refer to the Sr. Secondly, does not the 2nd have to bid at least what is owed to them> They can’t only bid $1 and own the property can they? They have not made payments to the first and I was demanded by the 2nd to pay them the 1st and 2nd mortgage. What if I continue to pay the 1st how can they be the owners of the property?