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mcmanneke · Joined: 16 Mar 2010 Posts: 1 1.71 Dollars($)

If a second lien holder forecloses on a property and there aren't enough funds to satisfy the first lien, does the first still have any legal interest in the property? Say a home has a $150k first lien and it sells for $95k, does the new owner get it free and clear? Does the first have any recourse beyond a deficiency judgment?

adonis · Posted: Tue Mar 16, 2010 9:38 pm Post subject:

Hi mcmanneke,

The first lender's interest would always get priority as the second loan will be considered as subordinate to it. If the second lender forecloses the property, then it will have to satisfy the dues of the first loan. Thus, if there is a deficient balance, then you need to clear it off or else the lender may place a lien on your other properties.

Posted: Wed Mar 17, 2010 5:45 am Post subject:

Thanks for the response. The lender would go after the borrower (maybe) for the balance, but the new property owner would have it free and clear, right?

I'm looking at this as a buyer. If a second forecloses and I can buy it cheap, I want to make sure I own it free and clear. I want to ensure that the first gets 'wiped out' and doesn't have some residual interest in the property.

jheard · Posted: Wed Mar 17, 2010 7:40 am Post subject:

The second lien holder takes title subject to the first lien. Thus, the first lien stays on the property on a second lien foreclosure.

Guest

Jheard:

Are you saying that, if the second forecloses and it's sold at auction to a third party, the third party is buying a property with the first lien intact? All sales proceeds go to the first.

At what point would the first lien get wiped out or would it need to be paid in full?

Example: $100k first, $20k second.

The second forecloses and sells for $50k to a third party. The $50k goes to the first. Does the third party now have a $50k lien on their property? I thought the third party got it free and clear.

smithsussane · Posted: Thu Mar 18, 2010 11:59 pm Post subject:

Hi Junior!

Welcome to forums!

The lender will hold the lien on the property though it is sold off. If the lien is not satisfied, then the third party will not get the property free and clear. If the second mortgage lender forecloses the property, then the balance amount of the first lender would be satisfied. If there is an excess amount, then it would go towards the second loan.

Feel free to ask if you've further queries.

Sussane

Guest

Thanks Sussane. So to be clear:

100k first, 20k second

The second foreclosure and the property sells for 60k to a third party. The 60k goes towards the first, and the third party owns the property with a 40k lien (remaining balance on the first) and the second is wiped out because it foreclosed.

Is that correct? If so, I assume the third party needs to service the outstanding balance of 40k but it amortizes based on the original principal, interest rate, etc.

Thank you in advance.

adonis · Posted: Mon Mar 22, 2010 12:42 am Post subject:

Welcome back Junior,

The second mortgage will not get wiped out. Either the original borrower or the new owner of the property will have to clear it off.

Guest

not paying the 2nd home equity, 1 mortgage is 200,000 2nd is 50 the house is only work 150,000 are you saying the 2nd can fourclouse?

Niicss · Posted: Fri Mar 26, 2010 2:26 am Post subject:

The second lender has the rights to foreclose the property. However, they generally do not do so as they will have to satisfy the debts of the first lender. In most cases, the second lender will simply charge off the loan and a collection agency will collect the dues from you.

Guest

Hello,

If the a third party buys the 1st lien and the home has a second lien, does buying the first loan rid the second and perhaps third lien? (in a trustee sale)

Thanks

adonis · Posted: Sun Aug 15, 2010 11:36 pm Post subject:

Welcome Abraham,

Though the third party buys the first lien, the property would still have the second lien on it. You would be liable for paying the second lien as well. If the second lien is not paid off, then the lender can charge off the dues and assign it to a collection agency who can harass you for the payments.

Guest

If a 2nd doesn't chose to foreclose and says it will charge off -- what are the reference to dues? Will the CA then work with you to reduce the payments? I am separated pending divorce and can't pay the 2nd; I can pay the 1st but the 2nd is threatening charge off -- i am not sure what that means....

jameshogg · Posted: Wed Aug 18, 2010 12:00 am Post subject:

Hi Guest,

If the second mortgage lender has charged off the mortgage, then he won't negotiate with you regarding the loan. You will have to negotiate with the collection agency so that they can reduce your payments and give you an affordable payment plan to pay off the balance. However, it would be the collection agency's discretion whether or not it would reduce your dues.

Thanks

Guest

K we have two mortgages on our house we are negotiating with the first lien holder we got papers from our second lien holder for foreclosure. What do we do? Do we contact the second lien holder and talk to them or do we contact a lawyer? I lost

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Foreclosure by 2nd lien holder