What About Foreclosing The 2nd
Have a seller with a 1 and 2nd. The 2nd is Homecomings and they are playing harder ball than in the past.
What happens if I simply take over the first mortgage and foreclose the 2nd?
I'm assuming:
1. The sellers will have a foreclosure on their credit from the 2nd
2. I have to take over the 1st by deed in lieu of foreclosure or by short sale.
3. After I have foreclosed the 2nd will I run into any problems when trying to sell it.
What are the thoughts out their in REI cyberspace?
Thanks--Jim
I'm assuming:
1. The sellers will have a foreclosure on their credit from the 2nd
Yes. A foreclosure appears on the credit report, even if the foreclosure is resolved. So would a Sheriff's Sale, Trustee's Sale, or any other type of forced public sale.
2. I have to take over the 1st by deed in lieu of foreclosure or by short sale.
A DIL would be offered (but not accepted) to the first mortgagee. You could purchase the mortgage via an assignment and become the mortgagee.
If you were to attempt a short sale, it would be in your best interest to negotiate a payoff with the second before you talked turkey with the first... unless the first is an FHA insured loan... then the second is limited to $1,000 or $2,000, as payment in full, depending upon who you talk to.
3. After I have foreclosed the 2nd will I run into any problems when trying to sell it.
You can only foreclose if you are the mortgagee meaning that you own the mortgage. If the second mortgagee forecloses, your continued interest and involvment is questionable.
Something is being left out here. You said there is a 1st and a 2nd. I assume you are neither. If Homecomings as the 2nd decides to foreclose, they could totally mess up this deal for you. A 2nd could foreclose and wipe out any junior lien (if such exists). The 1st would be protected. Tell us a little bit more about your deal so we can understand better what your question is. Good luck!
Something is being left out here. You said there is a 1st and a 2nd. I assume you are neither. If Homecomings as the 2nd decides to foreclose, they could totally mess up this deal for you. A 2nd could foreclose and wipe out any junior lien (if such exists). The 1st would be protected. Tell us a little bit more about your deal so we can understand better what your question is. Good luck!
Letsgomario-
To answer you question as short as possible the specifics are:
1. 1st is with BOA with balance approx: $164K. This is also VA. VA willing to do short but said BOA needs to call the shots.
2. 2nd (125% 2nd) is with Homecomings with balance of $38K.
3.2nd is willing to settle for $15K or else they foreclose.
4. I'm submitting an offer of $142K with BOA.
5. Sellers lost their jobs, are now now working but at a much reduced income and the wife is going through chemothereapy for breast cancer.
6. Sellers are moving out of state as soon as this mortgage/foreclosure situation is completed.
That's about it in a nutshell. What do you think. ----Jim
I FORGOT: areasonable FMV is around $205-210K.
Jim
Of course I don't know if the second is bluffing or not but ideally how long would it take them to foreclose? Sellers are only 2 months behind on payments.
If the 1st was willing to discount some I could go ahead and agree to the 2nd's demands of $15K.
I work for a mortgage co and after looking at the info you provided I can see why Homecomings is playing hardball. If they were to FC as a 2nd mtg, they have a good chance to recover almost the full value of their lien based on the FMV you provided. I am sure they also know the property could be sold for over $200K because they would have done a BPO (Brokers Price Opinion) which is a short version of an appraisal. I think Homecomings is in the driver seat. If they FC they would really mess up your deal. I think the discount they offered is reasonable and still would allow you to make a decent profit on this deal. I know that Homecomings does not really want to go through the FC process because is time consuming and expensive but they will do it as long as the FMV of the property shows that they can recover some or all of their monies owed. Good luck.
Letsgomario--
Thanks a lot for your feedback. Is it a dream to think the 1st would also discount and then I could payoff Homecomings $15K?
Jim
Grab the $15,000 deal. Nice job! Forget about a compromised sale with the VA. There is no justification for them to consider accepting less. Even if they did, would your Seller agree to sign a promissory note for the deficiency on the VA insured first in favor of the VA?
SSPro--
Thanks for the pep talk. The sellers would be willing to sign the promissary note and I've briefly discussed this with the VA. They said I'd need to work things out with BOA.
I guess why I'm trying to squeek out a larger spread isn't to greed, it's because I have two other homes purchased through SS with a great selling price and their still on the market. Just want to get as much padding as possible for things if they head south.
I keep everyone posted--jim
If the 1st knows the value of the property, and they should, they will be less apt to accept a short sale. They have a much better chance to FC on the property and recover their UPB * Unpaid Principal Balance* plus collections costs and FC fees. From what I see and provided the FMV of $205-$210K holds up, you still would be making a decent profit even if the 1st does not agree to a short sale. Maybe the fact that the borrowers have extenuating circumstances may sway them and they may even counter with a price in between your offer and what they are owed. It does not hurt to try. It seems you have a solid deal here. Good luck!
Here's a twist. Homecomings didn't realize their position is not $38K, it is actually $58K. I learned this from the title search and then meeting with the sellers again last night. Sellers did say $58K in our first meeting.
The sellers are also willing to let me take over the 1st and foreclose on the 2nd if Homecomings doesn't want to negotiate.
How can I do this?
Jim
Tom/Jerry/Jim
What you are saying doesn't make any sense to me.
How can you foreclose on the second if you do not OWN the second?????
Only the MORTGAGEE can foreclose.
IF you want to take over the first, and foreclose, are you prepared to PURCHASE the first mortgage? Because, ONLY THE MORTGAGEE CAN FORECLOSE!
SSPRO-
Guess I was thinking about this example the wrong way. Sounds like I need to stick to the basics and try and work something out with the 1st and 2nd through a short sale.
For some reason I was thinking if I owned the 1st I could somehow extinguish the 2nd (don't ask me why)
The sellers will not be making any more payments to either and can't. They want/are willing to do anything----including having the foreclosure on the credit hx.
I'm scratching for ideas on what to do if the 1st and 2nd are not agreeable to a SS instead of losing the house all together??????
"For some reason I was thinking if I owned the 1st I could somehow extinguish the 2nd (don't ask me why) "
This is plausible... but I didn't read anywhere where you said that you would own the first, only "take over" the first.
If you buy the first for cash, you can continue the foreclosure process. This may result in the second becoming extinguished and you owning the property... or, (if your state is a judicial mortgage foreclosure state that utilizes a Sheriff's Sale or a Trustee Sale) someone else bidding on and getting the property... Sorry I didn't understand what you were saying. You were thinking along the right lines.. but not saying what you intended to do in a way that I was able to follow you. Hey. Have a good Holiday weekend.