I am closing on a property when title found a 2nd on the house. The 2nd was part of the original purchase. Shortly after the Seller purchased the house (2005) the Mortgage Company was dissolved (prime lending issues) and the mortgage was moved to another company and over the years the mortgage has changed hands several times.
The Seller had a bankruptcy where the 2nd never came up, there is no record on her credit reports and she claims to have never made 1 payment to the 2nd. None of the following mortgage companies claim the lien.
Look for options to close versus filing suit or having to put up 2 times the lien amount in escrow until 2nd matures.
1. BK would generally not affect this lien. The BK would eliminate personal liability for the mortgage debt, but the lien would remain on the property UNLESS stripped via motion in the BK. The fact that this does not show on her credit and that she made zero payments are irrelevant to your title analysis.
2. The maturity date is not the relevant date here. Add to that date the statutory period for expiration of liens (research local law) in order to figure out how long your escrow would be held.
3. Somebody is the holder of this debt. They may not even be aware of it now, but they are out there with a valid claim. Some of the costliest (relatively speaking) title claims I've seen are forgotten or underwater 2nds which are bought for pennies and later pursued. The creditor surfaces before the lien expires and has a valid claim for ~3x the original amount due.
