Posted: Tue Jun 05, 2007 6:30 pm Post subject: The junior
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?
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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.
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
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.
Posted: Tue Jun 05, 2007 10:16 pm Post subject: RE: What happens to second lien/mortgage after deed-in-lieu?
Hi Guest,
As far as I know, deed in lieu does not work out well for properties where there are second mortgages. 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.
Posted: Wed Jun 06, 2007 2:03 am Post subject: RE: junior liens/second mortgage after deed-in-lieu
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.
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.
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.
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
Posted: Tue Jun 26, 2007 6:42 am Post subject: Deed in lieu of foreclosure w/second
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.
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.
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. _________________ Good is the Enemy of Great.
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.
miller_st
