Buying 2nd And Foreclosing
Has anyone ever done this successfully? Is it really a tool to force the 1st to short?
Here's what I have:
1st - $127K (VA)
2nd (secured credit card) - $9K
AV - $150K
Back Payments - $2.9K
Renter in place with a lease $950/mo through Oct. He wants to buy the place but going through a divorce.
Guy will L/O.
I'm thinking I should buy the 2nd - $1000 is 11% - and then I'll be in a better place to negotiate on the 1st. Thoughts?
there have been several thread about this.
You can force the 1st. If the 1st goes into default, you can step into the shore of the 1st and forclose.
I don't follow the 1K=11%.
If the secured card will sell, how much to the want?
$1000 is 11% of the $9000 that is owed on the 2nd.
you're thinking they would sell for 1000?
It's a secured card.
Are the back payment on the 1st?
I belive the 2nd will accept 1K and the back payments on the 1st are 2900
I do no exactly follow. Is the owner deliquent on any payements to date?
So you buy the second and foreclose (assuming the owner is late on the second). Will you buy the note of the first or try a short sell.
Brenda
The first has priority and even if you foreclose on the second after you buy the note you are then responsible for the first and making the payments. If FMV is 150K good luck getting a discount on the first, they already have priority.
I'm asking for $121K. I think it will still be a good deal even if they don't short:
127K + 1K (2nd will short) = 128K loan amount
150K AV
85% LTV
Interest only 3/1 ARM at 5.500% gives me a payment of $850/mo PITI and HOA. Could be $703/mo if I shifted the HOA dues to the tenant buyer when he options.
Renter in place already at $950/mo who wants to L/O. Seems like a no brainer with $100/mo cash flow plus $21K equity.
Would you all do the deal?
" Has anyone ever done this successfully? Is it really a tool to force the 1st to short?
Purchasing a junior lien and foreclosing is common...but that, in and of itself won't motivate a senior mortgagee to short.
What ever gave you that idea?
[addsig]
All other things aside, if it didn't tie up my cash flow, was cash positive after all the holding an allowance for repair costs and had 21K in equity I woud do the deal... As to forcing the first to short, I second SSP..
[addsig]
If you are a junior lien holder and you foreclose, is the first forced to sell you the note? I do not understand how this process works.
Brenda
The junior that forecloses can't force the senior mortgagee to do anything.... the senior, however, can and usually does demand payment in full from the owner which, in your scenario, would be the (former) junior lienholder... now owner in fact..
If the junior successfully forecloses, and the redemption (if any) expires, that (former) mortgagee will own the property... which is encumbered by a (presumably) foreclosing first mortgagee.
[addsig]
I was at a seminar and Paul Wells spoke. His quote was "by buying the 2nd you can control the first."
I wasn't sure what he meant by that - that's why I asked about using it as a tool.
I guess much depends upon the context... The operative word is control. You might be able to influence the first..... and that's a stretch. But control?
Please ask him, and let us know.