Are Department of Justice liens extinguished at foreclosure sale ?

[Martin M.]

If a DoJ lien is filed AFTER the foreclosing party’s lien – is the DoJ lien extinguished at the foreclosure sale (no longer attached to the property) ?

For example, foreclosing mortgage lender lien recorded in 2005 and DoJ lien recorded 2007.

If the answer is yes – is the DoJ redemption period 12 months from the date of the foreclosure sale?

Side note, I’m aware of the rules for IRS liens, e.g. they’re senior if recorded before foreclosing party and junior if recorded after, w/ 120 day redemption.

Thanks in advance to anyone that responds

[Sriv Nava]

1. Correct, the redemption period is one year from the date of sale (in NC this date is not the date of auction but end of the final upset bid period).
2. For reference Google "Title 28 U.S.C 2410"  which covers actions affecting property on which the United States has a lien
3. It's important to note that only judicial foreclosure sales will eliminate federal judgment liens (other than federal tax liens) in favor of the United States, subject to a right of redemption (1 year). Non-judicial foreclosures, like power of sale foreclosure in NC, will not eliminate federal judgment liens.
4. Non-judicial foreclosures involving junior federal tax liens are governed by another section of the US Code. Google "IRM 5.12.4 Judicial/Non-Judicial Foreclosures"

[David Randolph]

@Martin M.  I removed a DOJ Lien PRIOR to the purchase of a single family residence BECUASE I was negotiating a Short Sale that I was buying.  just fyi. Let me know if you want the details.

[Martin M.]

@Sriv Nava

Thanks for the detailed response. Have you seen this play out where you or someone you know purchased an auction property with a DoJ lien on it? If so, was it possible to work with the DoJ to have the redemption period reduced to less than a year?

[Martin M.]

@David Randolph

Thanks for that. I'll keep that in mind. It's mostly auction properties I'm looking at. One property in particular had a whopper of a DoJ lien on it, just over 600k

[Sriv Nava]

Quote from @Martin M.:

@Sriv Nava

Thanks for the detailed response. Have you seen this play out where you or someone you know purchased an auction property with a DoJ lien on it? If so, was it possible to work with the DoJ to have the redemption period reduced to less than a year?

As you may be aware, it's possible to remove the lien according to Title 28 U.S.C. 2410(e).

"Title 28 U.S.C. 2410(e) - Whenever any person has a lien upon any real or personal property, duly recorded in the jurisdiction in which the property is located, and a junior lien, other than a tax lien, in favor of the United States attaches to such property, such person may make awritten request to the officer charged with the administration of the laws in respect of which the lien of the United States arises, to have the same extinguished. If after appropriate investigation, it appears to such officer that the proceeds from the sale of the property would be insufficient to wholly or partly satisfy the lien of the United States, or that the claim of the United States has been satisfied or by lapse of time or otherwise has become unenforceable, such officer may issue a certificate releasing the property from such lien"

Locate the "officer charged with the administration of the laws in respect of which the lien of the United States arises" from the lien (a sample is provided here for the property I was researching - Assistant US Attorney Erin Secord) and contact him/her in advance to find out what information they would require from you if you win the bid. This attorney I contacted was very helpful in explaining what they would need from me if I were to make the request regarding this particular property. However, I did not win the bid on this property and did not pursue this action.

[Martin M.]

@Sriv Nava

This is really helpful. Thanks again. I haven't seen a lot of DoJ liens, but the ones I have have been quite a lot of money. So I wanted to be sure I understood the lien position and redemption before considering them

[David Randolph]

Quote from @Martin M.:

@Sriv Nava

This is really helpful. Thanks again. I haven't seen a lot of DoJ liens, but the ones I have have been quite a lot of money. So I wanted to be sure I understood the lien position and redemption before considering them

 I have dealt with these before so contact me directly if you need help or questions on one.

[Martin M.]

@David Randolph

Cheers David. I'll keep that in mind for sure