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Just Us
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Post subject: How deed in lieu affects 2nd mortgage or junior liens |
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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?
Thanks
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miller_st
Joined: 17 Jan 2007
Posts: 917
168.92 Dollars($)
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Post subject: 2 nd mortgage deed in lieu |
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| Quote: | | Also, If the bank is not able to satisfy the amount owed against the property, will there be a judgement against me for the difference? |
If the first mortgage holder agrees to accept a deed in lieu of foreclosure then he cannot take action to recover any balance dues by way of deficiency judgment.
The other question you have asked is about the second mortgage if dil is accepted by first mortgage company, in such situation the first mortgage company will be taking over the property along with the second mortgage lien over it.
But as far as I have seen a first mortgage holder does not agree to deed in lieu of foreclosure if there is a second mortgage on the property.
Miller |
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rimondino
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Post subject: |
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| junior liens are not wiped off in a deed in lieu of foreclosure and this is the reason lenders do not agree to a dil of foreclosure is there is a second mortgage |
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colin
Moderator
Joined: 30 Jun 2006
Posts: 602
Location: Waltham, Massachusetts
112.65 Dollars($)
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Post subject: deed in lieu second mortgage |
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Hi,
Welcome to Mortgagefit forum.
| Quote: | | When you do a deed in Lieu with the primary mortgage what happens if there is a second mortgage held against the property? |
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
Moderator
Joined: 05 Jul 2006
Posts: 1651
Location: New Brunswick, New Jersey
308.83 Dollars($)
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Post subject: RE: deed in lieu: what happens to junior lien |
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Hi Guest,
As far as I know, deed in lieu does not work out well for properties where there is a second mortgage. This is because such loans do remain as junior liens on the property even after the deed-in-lieu. So, the lender actually accepts the property subject to the second mortgage lien. And, not getting a clear title (as there is a junior lien on the property), is one of the reasons why lenders do not prefer to agree to a deed in lieu of foreclosure.
Take Care |
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Jessica
Community Mentor
Joined: 08 Jun 2004
Posts: 813
Location: OHIO
194.39 Dollars($)
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Post subject: RE: deed in lieu with 2nd mortgage |
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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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Just Us
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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 $10,000 loss to no avail. Right now the payments are killing us. If you have ideas for another way out, please respond.
Thanks again for ALL of your help |
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coronado
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| In this situation you have to buy some more time and hope the market situation improves and then try to sell. You have moved out to some other location, so why not try to find a tenant for this house that could be of some help for you with the payments. |
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Just Us
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| Yes, renting the property out was an option we looked into. However, we are several states away now and it would be impossible to keep up with it. If we hire property management, between that cost and the low rental rate for the area now, it would only cover about 1/2 of the payment. Again, we are sinking under the payment. Thanks for your reply |
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adonis
Joined: 22 Oct 2005
Posts: 3777
Location: ALASKA
109.26 Dollars($)
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Post subject: |
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Welcome back Just us.
Did you discuss the possibility of deed-in-lieu with your lender?
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Procrastination is the enemy of your financial sucess |
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Hope Theus
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Post subject: deed in lieu 2nd mortgage |
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| 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
Joined: 17 Jan 2007
Posts: 917
168.92 Dollars($)
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Post subject: 2nd mortgage deed in lieu |
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Hi Theus,
If same lender also holds the 2nd lien then he will check whether the house will get sold for an amount to recover his dues on both the mortgages. If he does not expect the house to get sold for an amount which would help him recover his full balance then he will not agree to a deed in lieu.
Miller |
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Niicss
Joined: 03 Oct 2005
Posts: 2579
Location: New Jersey
402.93 Dollars($)
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Post subject: 2nd mortgage deed in lieu |
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| Quote: | | 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. |
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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Good is the Enemy of Great. |
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Evelyn
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Post subject: Foreclosure with 2nd mortgage |
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| 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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larry
Joined: 27 Jun 2007
Posts: 3328
474.44 Dollars($)
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Post subject: |
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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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