2nd Mtg. Closing? What About The 1st?d
What happens when a second mortgage forecloses? does the first stay in place?
When I did some research on a foreclosure, i found that the loan that is FCing is from 2001 with GMAC. There is a first from 1999 with Countrywide that hasn't posted a NOD or anything...yet.
Could someone just let their second foreclose and keep paying on their first?
You have to deal with the first just like any other Senior lien on the property. It lives on and you're just down the line in the pecking order.
To protect your interest though you should acquire the 1st position too otherwise, if the 1st forecloses you could be wiped out.
So if the second closes, the first can just stay in place? Does the second mtg company get anything?
The first has to stay in place because it has seniority over the 2nd.
If the 2nd forecloses, the 2nd mortgage company gets whatever you (or someone else) pays for it at the Trustee Sale - if it goes that far.
Quote: If the 2nd forecloses, the 2nd mortgage company gets whatever you (or someone else) pays for it at the Trustee Sale - if it goes that far.
Let's see if I understand correctly.
1st mtg is $100K
2nd mtg is $50K
Is the homeowner doesn't pay the second mtg payments, the second mtg company can start the foreclosure?
If it goes all the way to foreclosure, what happens then?
If the property is sold at auction, the proceeds of the auction will pay off the creditors based on their lien position . The first will be paid off, then if there is enough the second will get paid off, then the third etc. The second may choose to take posession of the property, and keep the first loan in place, and essentially take the property over "Subject 2" the existing first. Then market the property and sell it themselves. Either way, the First gets paid.
So in this situation if I can buy the second for $25K then i just owe the first their $100K?
Or if the second mtg company forecloses, sales at auction for $130K, the first gets paid off, and the second gets $30K?
I think i understand it now, Thanks
The second foreclosing has no affect on the 1st. The second is only foreclosing on their ineterest. I believe if the second foreclose and sell for 130k and there is a 50 K payoff, the flormer owner would get the excess and you would still be responsible for the first mortgage of 100k.
Can anyone verify that last post for accuracy?
Your Example:
100K first
50K second. The 2d lender forecloses and the property goes to sale and brings 130K at the sale. The first gets paid off, the second gets 30K and writes off the other 20K. The winning bidder gets the house free and clearr for the 130K bid price. If there would have been a third mortgage, it would have been wiped out. The additional risk to the second, and third position is why they generally cost you more in interest, points etc to establish than a first loan does. If a senior loan forecloses the junior loans are generally wiped out. If a Junior loan forecloses, the Senior loans are paid off first..
That is incorrect. The second cannot foreclose on the first. A junior loan cannot foreclose on a senior loan. It can buy out the senior loan by way of an assignment but it cannot, by way of a foreclosure, wipe out the interest of a senior encumbrance.
Jillaco is CORRECT
Jeff12002 is incorrect
Mrs. Meltzer
OOPS!, Thanks all for the lesson.
Jeff
scenario-1st-100k owed
2nd-50k owed
no other liens/judgments of record.
if the 2nd foreclosed and someone bid 130k...50k to the 2nd, prior owner can file for 80k surplus... 100k 1st mortgage remains.
Quote: I believe if the second foreclose and sell for 130k and there is a 50 K payoff, the flormer owner would get the excess and you would still be responsible for the first mortgage of 100k.
Why would someone buy the second mortgage? unless they didn't know there was a first.
I would buy a 2nd!! if the property is worth 200k and the first is 120k and the second is 20K.........still a good deal of equity left! All kinds of different scenarios where a second could be a profitable purchase.
Ive made a lot of money buying seconds. You buy at a discount. Maybe a big discount. The prob is that if the second is in defdault the homeowner is not payig the first either - and you have to step in and pay the first while you foreclose on the second. For that reason you record a reqwuest for niotice that requests that if the first goes into default you are given formal notice.
Quote:
On 2003-09-23 15:53, OCSupertones wrote:
Quote: I believe if the second foreclose and sell for 130k and there is a 50 K payoff, the flormer owner would get the excess and you would still be responsible for the first mortgage of 100k.
Why would someone buy the second mortgage? unless they didn't know there was a first.
It happens more frequently than you would think. I just witnessed a fellow pay $165K on the courthouse steps for a property that was worth around $190K. It was a 2nd mortgage judgement of $70K that was being bid on. The 1st had a balance around $105K. The buyer was elated as he gave the clerk his 5% deposit and headed for the bank. We all looked at each other and chuckled, knowing that this guy was in for a rude awakening when he finds out that he just purchased a $190K house for $270K when he adds in the 1st. I'll bet the owner of the property will be very happy. to get $95K in his hand. The best he could have hoped for on the retail market was about $15K less title insurance and recording fees.
This went to miscommunication quick....
Jorge121 is the post to read...for correct info....
Strange - I posted some info on this thread and it has disappeared. I've bought many 2nds and know a little about it. first and second both go into default, holder of second starts making the payments on the first while he forecloses on the 2nd. he typically puts in a bid at auction for the total amount of everything above him plus his loan - since anything more than that does not go to him. He does all this beczuse he buys the 2nd at a discount - sometimes a very deep discount. He protects his position by fioing a request for notice of default on all liens senior to his.
One more time. The 2nd forecloses. The sale is to satisfy the 2nd. mtg. debt. Any money in excess of what is owed the 2nd would go to the next in line such as a judgment. . Lastly,after all debts are satisfied , the owner of record. Who is then promptly kicked out of the house.
The successful bidder now must make payments to the 1st and owes the balance due the 1st as well as any shortages in the impounds and any late charges, NSF, or other fees which were previous owed by the defaultee. Some lenders will now invoke the "due on sale clause". This should not be of great concern because they generally contact you by letter and give you 30-60 to pay them off. If you do nothing, then their only recourse is to foreclose which depending on wether its a judical or nonjudical foreclosure will take months. During that time you either flip or refinance.
Why would you buy a 2nd? One word. EQUITY.
Side story: A couple of years ago I was at a trustee's sale. I was standing next to a newbie who was bidding with abandon. Out of the corner of my mouth I said, " you know this is a 2nd" I thought he was going to pass out on the spot. He thanked me profusely. Moral. You got to do your homework. You just can't show up and start bidding.
Guys, and you too Mrs. Metzler. Stop a minute.
The first is happy and does not foreclose but what you have said about the players I expect Countrywide will awaken soon and start a foreclosure. In the meantime
The second is foreclosing. That is only from the postion of the second. Whoever wins the foreclosure bidding shall inherit that lst trust deed sitting there. It is still there all $100,000.
The friendly second if the winner gets the property with the lst still there and soon that nice Countrywide will come along and demand payment. That is it.
Now suppose some drunken sot shows up and starts to overbid. Any sum above the starting bid of the second will go to the nice people who are being foreclosed they are entitled to the overbid. OK you got it important you understand. You will all be tested in the near future.
One other thing do not get cute and think you can buy the property for walk away money and take the property in your name, that foreclosure from GMAC is grinding. They are difficult to deal with and while a short sale is www.possible.The correct approach is to try to buy the note at discount. from them. To do that you need a second loan standing by and I do not think that is possible. However if you desire to proceed. Check your values with great care. Enjoy, Lucius