Need advice on odd HOA foreclosure with underlying mortgage

7 Replies

Hey BP,

I'm trying to help a seller out of a bad situation. The current owner bought a house dirt cheap at a foreclosure auction several years ago in Dallas. It was an HOA foreclosure, so the underlying mortgage stayed in place. The new owner felt bad for the original owner and let her continue to live in the property while she paid her mortgage and also paid him some nominal rent, I think.

Now the women has stopped paying him rent and also stopped paying the HOA fees, so the HOA is threatening to foreclose again, but this time on the new owner. The guy just wants out.

In addition, the woman living in the house actually refinanced her original mortgage last year. After running comps, the new loan appears to be 30-50% above the home's current market value. I don't know how this happened, and I didn't realize you could refinance a loan and pull out money if the collateral property is no longer in your own name? The deed is in the new owner's name who wasn't even aware of the refinance. 

Anyway, I feel like this guy's just out of luck, so any thoughts from y'all would be appreciated. I've already told him he needs to get an attorney.

Thanks!

Chad

If what you described is true, then no, she couldn't refi the property. Your friend can either walk away, or evict her and get a paying tenant. If the lender forecloses on the "new" mortgage, they could be defeated. If in fact the previous owner "refinanced", as in got a new, higher mortgage and Paid Off the existing mortgage, then the property will likely end up being free and clear when the "new" mortgage is contested. Don't know Texas procedures, but he could likely do a Quiet Title action now. But perhaps, the existing mortgage was a LOC, or it was Modified, which would mean the previous mortgage wasn't released, but the new higher amount would be to be contested. But, either one of these scenarios is unlikely, as it would be a major oversight to modify a mortgage without the lender checking title.

Ok, so original owner A looses ownership of house via HOA foreclosure to auction buyer B, who allows A to remain in property?

A refinances, despite record ownership being in name of B?

I will introduce a new legal term, which may apply to both A and B:  

 S.O.L.

(I think it's latin)

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