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How deed in lieu affects 2nd mortgage or junior liens

miller_st's picture
miller_st | Joined: January 17, 2007 04:47 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:7f3dceed5c]Also, If the bank is not able to satisfy the amount owed against the property, will there be a judgement against me for the difference? [/quote:7f3dceed5c]

If the first mortgage holder agrees to accept a [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url] then he cannot take action to recover any balance dues by way of deficiency judgment.

The other question you have asked is about the second mortgage if dil is accepted by first mortgage company, in such situation the first mortgage company will be taking over the property along with the second mortgage lien over it.

But as far as I have seen a first mortgage holder does not agree to deed in lieu of foreclosure if there is a second mortgage on the property.

Miller

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

junior liens are not wiped off in a deed in lieu of foreclosure and this is the reason lenders do not agree to a dil of foreclosure is there is a second mortgage

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colin's picture
colin | Joined: June 30, 2006 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome to Mortgagefit forum.

[quote:4efe0088f4]When you do a deed in Lieu with the primary mortgage what happens if there is a second mortgage held against the property? [/quote:4efe0088f4]

The primary mortgage company will take title of the house with second mortgage lien on the house still existing over it.

At the time the house will be sold the lien will have to be paid off as any buyer will not accept to take ownership of house which has a pre-existing mortgage lien on it.

Colin

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

As far as I know, deed in lieu does not work out well for properties where there is a second mortgage. This is because such loans do remain as junior liens on the property even after the deed-in-lieu. So, the lender actually accepts the property subject to the second mortgage lien. And, not getting a clear title (as there is a junior lien on the property), is one of the reasons why lenders do not prefer to agree to a deed in lieu of foreclosure.

Take Care

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Jessica's picture
Jessica | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

Usually when the first lender accepts a deed-in-lieu, he includes a non-merger clause into the deed-in-lieu agreement. This clause prevents the junior lien holders on the property to take any legal action against the first lender. Generally, the junior lien holder may take the action in case the outstanding balance on the second mortgage isn't paid by the first lender taking over the property.

However, including the non-merger clause does not mean that the first lender does not have to pay the junior liens. He retains the responsibility of repaying the second mortgage until and unless he comes into any negotiation with the second lender. And, if the first lender finds that he is not able to sell the property at a price such that he can retrieve his money and also pay off the second loan, he may cancel the deed-in-lieu and later foreclose the property. This is done in order to cancel any claim made by the junior lien holders.

Hope I could help you.

Regards,
Jessica.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

This really helps a lot. We are in a situation where the market is flooded with foreclosures and our property value has plummeted. We move from this area 2 years ago and have not had any success in the sale of the home in question. We have even tried to sell and absorb up to a $10,000 loss to no avail. Right now the payments are killing us. If you have ideas for another way out, please respond.

Thanks again for ALL of your help

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

In this situation you have to buy some more time and hope the market situation improves and then try to sell. You have moved out to some other location, so why not try to find a tenant for this house that could be of some help for you with the payments.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Yes, renting the property out was an option we looked into. However, we are several states away now and it would be impossible to keep up with it. If we hire property management, between that cost and the low rental rate for the area now, it would only cover about 1/2 of the payment. Again, we are sinking under the payment. Thanks for your reply

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome back Just us.

Did you discuss the possibility of deed-in-lieu with your lender?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I understand that some lenders will not do a deed in lieu of foreclosure when there is a 2nd lien on the property. What if the second lien is with the same lender.

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miller_st's picture
miller_st | Joined: January 17, 2007 04:47 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Theus,

If same lender also holds the 2nd lien then he will check whether the house will get sold for an amount to recover his dues on both the mortgages. If he does not expect the house to get sold for an amount which would help him recover his full balance then he will not agree to a deed in lieu.

Miller

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:217b28b5f4]I understand that some lenders will not do a deed in lieu of foreclosure when there is a 2nd lien on the property. What if the second lien is with the same lender.[/quote:217b28b5f4]

I'd agree with Miller. Lender would only agree to accept the house through dil if he sees that amount left on both the mortgage combined could be recovered after taking over the house through a deed in lieu.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What happens to the 2nd mortgage if the 1st mortgage does not do a deed in lieu and just does a foreclosure?

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Evelyn,

The lender will have to pay off the outstanding balance of the second mortgage with the money received from the foreclosure sale of the first mortgage. After doing the foreclosure it will be his duty to pay off the second mortgage.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

That does not happen in a foreclosure on homes with second mortgages.

If it's a deed in lieu accepted by first lender, then it's his liability to pay off the second loan. But inr a foreclosure, if the home sale proceeds do not cover the second loan balance entirely, then the second lender demands it wither from the borrower or attends the home sale and bids such that he gets his money through the sale. or else, the second lender can go for a charge-off and forgive the debt. But he may also issue a judgment against the borrower or garnish his wages through court order.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

can the lender go after us ,and require us to pay the 2nd mortgageif the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] is the same lender as the primary mortgage lender after a DIL.

pls respond

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Hemet,

After a deed-in-lieu on the first mortgage, if the lender finds that you are unable to pay off the second mortgage, he may charge off the loan and will accept the outstanding balance of the loan as a loss.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We own a home with my father in law. We have never made a late payment (past the 30 day mark) but our interest rate just jumped and it is becoming very difficult to make the payment prior to the 30 days late.

We have been weighing our options and are not sure what we should do. We owe $460 on our home and according to a few lenders/appraisers, our house is valued at $470 to $475. Our first and second loan are with different companies. We have listed the house but with the market the way it is, you can't get a 100% loan so whoever were to buy our home would have to come in a substantial down payment. That possibly will not happen.

Do you think a DIL is a possibility? My father in law just added my husband to the title a few weeks ago but my father in law is the only one on the loan. If a DIL is an option, who's credit will it affect?

Please respond asap.

Thanks

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Doris,

Your post has already been replied here at [url]http://www.mortgagefit.com/deedinlieu/affect-credit.html[/url]

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I lost my high paying job in the homebuilding industry early August 2007. I have yet to secure new employment. As soon as I lost my job, I listed my home for sale at market value of $660K. I have since had 3 price reductions down to $550K, and still no showings. I contacted the 1st lender yesterday (Countrywide) and after evaluating my financial circumstances they agreed to a DIL knowing that another lender holds a 2nd. They offered to start the process immediately and were very sympathetic. To top it off - this home is only 1 1/2 years old and I was electrocuted in Jan. 2007 simply by unplugging a vacuum cleaner. A construction defect report indicated numerous fire, electrical and safety issues which the builder has not completely corrected. I suffered personal injury and am heading towards litigation using a PI law firm retained as soon as I was injured. The lender knows that the home has issues, which apparently they do not need to disclose and can sell the home "as is". They suggested that I start looking for a place to live and move out within the next 30-60 days. As long as I keep them informed they agreed to cooperate. I am actually starting to feel relieved however will wait and see how things progress.

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Karen,

It is unfortunate to hear of your situation but at the same time it is good to know that your lender is co-operating with you.

In case of a deed in lieu, the lender cannot seek a deficiency judgement.

Is the present price sufficient to pay off both the mortgages?

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Karen,

[quote:a85c7a5881]As long as I keep them informed they agreed to cooperate. I am actually starting to feel relieved[/quote:a85c7a5881]
This is why we always suggest you to contact the lender as soon as possible whenever you face problem with your loan payments. You are the live example who gets help from the lender and now feeling relieved because you have informed the lender and co-operate with him. I hope people will see your post and will learn that it will be always helpful if you co-operate with your lender.

It will be helpful for us if you can update your situation. Feel free to ask if I can provide you any further information.

Thanks,
Larry

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evolovik26's picture
evolovik26 | Joined: August 15, 2007 11:43 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

countrywide is getting pressure from investors to keep paying customers around and to get as much as they can to liquify their portfolio again.

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Jeanette's picture
Jeanette | Joined: October 19, 2007 08:57 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:546812be2c]When you do a deed in Lieu with the primary mortgage what happens if there is a second mortgage held against the property? Also, If the bank is not able to satisfy the amount owed against the property, will there be a judgement against me for the difference?[/quote:546812be2c]

Before you can even consider an alternative, the borrower must be willing to offer a deed in lieu. There are advantages to taking a deed in lieu. It could save you time and money. You should order a preliminary title report and review it carefully to determine if there are any junior liens that would survive the deed in lieu. You then take the deed in lieu subject to a title insurance policy being issued in your favor as reflected in the preliminary report. This procedure would take a lot less time than the approximate four months of foreclosure. The main disadvantages to taking a [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url] are the junior liens will not be extinguished and that the, as a borrower, you may later have a change of heart and seek to have the courts set the deed in lieu aside.

A junior lender, should give the senior lender notice of their lien. Many lenders would like to reduce their collection efforts by having the junior lienholder advance to their loan. Send the primary lender a notice which tells them that you are willing to reinstate their loan.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi, my first morgtage is with HSBC and my second mortgage is with HFC (a subsidiary of HSBC). I want to do a DIL with HSBC. Would they agree to do a DIL because my second mortgage is with their subsidiary HFC?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Kathy,

Lenders generally do not agree to accept a deed in lieu if there is a second mortgage on the property. But you may talk to your lender and see if they are willing to accept.

Are you facing a foreclosure?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have PMI and I'm having difficulty making my payments due to disability....will the PMI help? I also have a HELOC

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Lois,

Welcome to the forum.

PMI will protect a lender against loss as you are not making payments. You have a HELOC also. I suppose you do not have PMI against HELOC. IS it not so?

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

It could have been better if you had applied for a mortgage disability insurance. PMI will no doubt help but for the first loan only. What are your plans? how do you wish to pay off the Heloc then? you can't keep it as it is. Or are you comfortable just paying off the Heloc?

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lisa.scherzer's picture
lisa.scherzer | Joined: January 4, 2008 08:48 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Lois,

PMI insurance does only protect the lender. But you may have another option if you have good credit. You may be able to [url=http://www.mortgagefit.com/refinance.html]refinance[/url] into a mortgage without PMI insurance thus reducing your monthly mortgage payment. If you qualify, you can borrow up to 95% of the value of your home to pay off the old mortgage and still not have PMI insurance. It is possible to get a fixed mortgage rate in the 5's with this option.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If my home get floreclosure what happens to the property tax?

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi pat,

Welcome to the forum.

Even after foreclosure you will have to pay your due property tax if you have any. Otherwise I think you need not to pay any thing like property tax there after.

Best of luck,
Larry

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freds11's picture
freds11 | Joined: March 17, 2008 08:55 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Thanks for the help I was wondering if I would need to pay that tax.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Is it any more beneficial credit wise to do a died in lieu over a straight foreclosure?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome tb,

Foreclosure and deed in lieu have similar negative effects on your credit report. But if the lender approves you for DIL then he will not ask you for the deficiency judgment.

Let me know if you have any more queries.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My husband and I will be [url=http://www.mortgagefit.com/know-how/filebankruptcy.html]filing bankruptcy[/url]. We have a 1st and 2nd mortgage. The 1st is thru Countrywide. The 2nd is through BofA. Countrywide told us we qualify for a DIL. However, what happens with the 2nd. Will we just put that debt in with the bankruptcy? Or do we put both 1st and 2nd mortgages in with the bankruptcy???? Any help????

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi serenasmom.

Welcome to the forum.

If Countrywide accepts the deed in lieu then why are you willing to file bankruptcy? Are you filing chapter13 or chapter7? I think you should talk with the second lender and see if you can qualify for any repayment plan. Even if you file bankruptcy you will be liable to pay the mortgage. Is that the lender is harassing you for the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] payment.

Please inform us about your situation a bit more so that we can suggest you.

Best of luck,
Larry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i have a first and second with wells fargo, i own a 1 bedroom was single when purchased now am married with kid and need bigger place, i have a arm 5 year fixed will reset in a year tried to refi, appraisel came in at 1/2 of what is owed, have gone deliquent to renegotiate, or do dil? what will happen if they dont and thy forclose?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hello Ryan.

If the property has been appraised in half of what you owe then they may not agree for [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url]. So consult the mortgage company ASAP. IF you face foreclosure then not only your credit will be affected but they can even come after you for the deficiency judgment.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We have two investment properties bought 2.5 years ago at the peak, saturated rental market in both areas, and add'l extenuating circumstances. Is there any benefit to doing DIL vs. Foreclosure (we have realized there's no way of keeping these properties).

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Jessica's picture
Jessica | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Jessica,

Welcome to our community forums.

Well Amber frankly speaking it's more or less the same because you lose the properties in both cases. Also, the credit effects of foreclosure and dil don't differ much. But did you have a talk with the lender? what option is he suggesting?

Regards,

Jessica

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We live in pennsylvania our primary home. Our second home is in Placida Florida we can not keep the florida home & would like to do a deed inliue ,but i am so afarid that i will my home plus we have a small duplex in pennsylvania which pays some of our bills,we are getting behind on things here i just had to give up life insurance policy,i am 62 my husband ia 79,we have never missed a payment for a morgtage,are you to get behind on your payments first,thank you very scared,We owe $290.00.00

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Madeline!

Welcome to Forums!

You want to put your second home in Placida Florida for a deed in lieu foreclosure. I feel this is a good choice that you have done. A deed in lieu foreclosure will not affect your other properties. Rather the deficient amount resulting from the sale of the property will also be forgiven.

Feel free to ask if you have further queries.

Sussane

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

can you do a fourclosre on a 2nd mortgage and keep paying on your first with the same lender

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi anonymous,

As both the mortgages are with the same lender, you will have to speak to the lender first. It will be his discretion whether he will approve it or not. If the second mortgage is not yet foreclosed, then you can speak to the lender and check if he can offer you a loan modification on the second mortgage. This will help you to save your credit also. To know more about loan modification, check out the following link:
http://www.mortgagefit.com/know-how/loan-modification.html

Thanks,

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

My friend has a property close to foreclosing, I would like to by the property but he has a $10,000 IRS lien on the property, how does this affect my purchase, would it be my responsibility?

Thanks

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Stevo,

It is always better to ask the seller to pay off the lien and get a lien release certificate and then purchase the property. A query similar to yours has been answered in this given link:
http://www.mortgagefit.com/propertytransfer/irs-lien.html

Please take a look.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am in a very bad situation. I bought a small home and was going to sell my main home and use some of the proceed to reduce my payment as I was about to go through a separation and the mortgage is in my name only. Things did not work to plan prices dropped in my neighborhood and it was no longer viable to sell one home to pay off the other as I planned. I managed to rent the 2nd home but I was already in arrears about 4 months before I found a tennant and I could only rent it for half the mortgage. I arranged a repayment plan with the Bank but it's too high they say I need to pay that amount to catch up. Things were going good until Nov. I did not have enough funds to pay mortgage on either homes. The terms was they can pursue foreclosure if they did not receive the payment on time. Is there anything else I can do to stop foreclosure? Can foreclosure be stopped was it has started? I am very concerned for the tennants in the home. I hear the Bank is not so willing to help people with 2 homes, I really don't want 2 homes I was trying to do the right thing and make the payments as it my mistake I shuold not have bought another home until the first home got sold, it's a harsh lesson I have definately learned the hard way. I did try to market the home without success at that time. Please what are my options right now?

I was about 4 months behind when I accepted a payment plan. I kept up to date until Nov. Is it too late to ask for a short sale or [url=http://www.mortgagefit.com/deed-lieu.html]deed in lieu of foreclosure[/url]? Can foreclosure be stopped once it has started?

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi default,

[quote:70c4711f6c]The terms was they can pursue foreclosure if they did not receive the payment on time. [/quote:70c4711f6c]
If you have signed an agreement with the lender that they will foreclosure the property if you cannot pay, then I don't think you will be able to [url=http://www.mortgagefit.com/foreclosure/17ways-avoid.html]avoid foreclosure[/url].

As far as short sale or deed in lieu foreclosure is concerned, you can definitely apply for it but it will be the lender's discretion whether he will accept it or not. No, its not late to apply for a short sale or deed in lieu foreclosure.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have a property with a 1st and a 2nd mortgage with the same lender,I have recently been relocated with my work and have tried to sell the home with no success. I need to relocate in order to keep job, the appraisal amount is more then owed would a dil be a reasonable solution for both mortgages?

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