Hi all,

I am in california. Bought a house on a 2nd loan foreclosure. I got the deed from 2nd loan trustee.

I know that I have to payoff the 1st loan too. So, I found the bank and trustee for the 1st loan. Trustee gave me the payoff quote for the 1st loan. The quote is higher than the market value of the house, so I want to negotiate the payoff amount for the 1st loan. Trustee says I need to talk to bank for negotiations, but the bank does not want to talk to me because I am not authorized on the account.

It is ironic that they sent me the payoff amount, but say that they cannot negotiate because I am not authorized...Isn't it strange? If I am not authorized, why did they send me the payoff quote? Also, I asked what happens after I payoff the 1st loan? they say, they will just issue "full reconveyance". Aren't they supposed to give me another deed ?

Do we have anyone experienced in dealing with 1st loan after buying 2nd loan foreclosure.

To summarize, I have 3 questions:

- How do I negotiate the payoff amount for the 1st loan given the situation above? Bank and their trustee sent me the payoff quote, but does not want to talk to me saying I am not authorized on the account.

- After I payoff the 1st loan, aren't they going to issue a deed for me? instead of full reconveyance? FYI, I already have a deed which i got after winning 2nd loan foreclosure.

- Suppose I don't pay the 1st loan and walk away, and 1st loan bank proceeds to foreclosure. Will the foreclosure be on me or current owners/occupants? Will it hurt by credit history or theirs? 

Thank you

Originally posted by @Joe A. :

Hi all,

I am in california. Bought a house on a 2nd loan foreclosure. I got the deed from 2nd loan trustee.

I know that I have to payoff the 1st loan too. So, I found the bank and trustee for the 1st loan. Trustee gave me the payoff quote for the 1st loan. The quote is higher than the market value of the house, so I want to negotiate the payoff amount for the 1st loan. Trustee says I need to talk to bank for negotiations, but the bank does not want to talk to me because I am not authorized on the account.

It is ironic that they sent me the payoff amount, but say that they cannot negotiate because I am not authorized...Isn't it strange? If I am not authorized, why did they send me the payoff quote? Also, I asked what happens after I payoff the 1st loan? they say, they will just issue "full reconveyance". Aren't they supposed to give me another deed ?

Do we have anyone experienced in dealing with 1st loan after buying 2nd loan foreclosure.

To summarize, I have 3 questions:

- How do I negotiate the payoff amount for the 1st loan given the situation above? Bank and their trustee sent me the payoff quote, but does not want to talk to me saying I am not authorized on the account.

- After I payoff the 1st loan, aren't they going to issue a deed for me? instead of full reconveyance? FYI, I already have a deed which i got after winning 2nd loan foreclosure.

- Suppose I don't pay the 1st loan and walk away, and 1st loan bank proceeds to foreclosure. Will the foreclosure be on me or current owners/occupants? Will it hurt by credit history or theirs? 

Thank you

Several things going on here. It sounds as though you bought the property by winning the bid on the 2nd. It also sounds as if the 1st had a foreclosure sale date scheduled as well. The 2nd happened before the first. That takes care of the 2nd's loan. You paid it, but not the first loan. You are now the owner of the property with a special warranty deed. Neither bank actually ever owned the property, they simply had loans guaranteed against the property. That is not ownership. You own the property. The second is allowed to issue a SWD because of the foreclosure action.

Because of the circumstances surrounding how you bought the property, you now have "ownership" of the first loan, even though it isn't in your name, since that still attaches to the property. The first loan had an opportunity to bid against you, but they chose not to for various reasons. They know you have to pay them off to get clear title. Pefectly legit.

Your credit can not be hurt in any scenario. You didn't sign for the loan. The previous owner's credit is already trashed. They can't be hurt any worse. They no longer have any say in the property and are to vacate the property.

On the first loan, when a loan gets paid off, Issuing a "full reconveyance" is proper. It says that the loan has been paid off. It has nothing to do with ownership. The bank never owned the property so there is no deed to transfer.

The question is whether the bank in 1st position will negotiate with you. Actually, they don't have to for a couple of reasons. You aren't authorized on the loan, (you would have to get written persmission from someone on the loan and submit it to the bank).  Also, it sounds like the bank is playing hardball. They know you have to pay them off or they can start a foreclosure and get all of their money from you (or at auction) when you cure the foreclosure.

This is a hot market and there would be other bidders at an auction. 

If you cut your losses now, you lose only the money you spent to win the bid on the foreclosing 2nd and it doesn'y hurt your credit.

I don't know from what you've stated what the best course of action would be for you. There are a lot of varibles. Time, resources, ARV, condition, location, cash flow possibilities, etc. I hope that gives you some information so you can chart your course of acton.

Rent the property out until the 1st forecloses to try and recoup whatever you paid at the 2nd auction

Thank you @Mike Hern and @Chad U. for your response. Very helpful.

If that's the case, I assume I can start eviction process although I haven't paid off the 1st loan.  Please correct me if I am wrong.

Originally posted by @Joe A. :

Thank you @Mike Hern and @Chad U. for your response. Very helpful.

If that's the case, I assume I can start eviction process although I haven't paid off the 1st loan.  Please correct me if I am wrong.

 Yes, but hire a real estate attorney versed in creditor's right and/or evictions to ensure you're in the clear.  

Originally posted by @Joe A. :

Thank you @Mike Hern and @Chad U. for your response. Very helpful.

If that's the case, I assume I can start eviction process although I haven't paid off the 1st loan.  Please correct me if I am wrong.

As already stated, it is well worth spending the money for an hour's consultation with a real estate or eviction lawyer.