I am researching a property which is listed at foreclosure auction. This is very basic question please ignore my ignorance.
It is foreclosed by lets say ABC Bank with $100,000 principal original deed date: 1/1/1999.
It also has other deed of trusts as below:
1. Lender: DCF Bank, Principal: 8000, Date: 1/1/2005
2. Lender: XYZ Bank, Principal: 7000, Date: 1/1/2012
So the question is if I buy at auction do I have to pay outstanding balance on which of the deed of trusts?
Thanks in advance,
In the majority of cases, if the foreclosure is in the first lien position then the subsequent loans secured by the property become unenforceable from a collection standpoint. There are exceptions based on what state laws say, but the above is true in general. So in your example, if ABC forecloses (judicial or non-judicial) on a deed of trust (or mortgage) recorded on 1/1/1999, the bidder (and subsequently the purchaser) at the foreclosure auction would not be financially responsible for the second and third liens (by mortgage or deed of trust.) As always, check with an attorney for your specific needs and make sure the foreclosure process is performed with all services and notices property performed and documented in the special proceedings file... per the process defined in your state's laws.
I currently live in Alabama, but I'm a Texas-licensed attorney. Texas uses non-judicial foreclosure via a trustee's deed. Liens filed before the filing of the mortgage being foreclosed will remain on the property. Liens recorded after the mortgage that is being foreclosed will be stripped off the property. HERE is a link to an excellent article written by a Texas attorney.
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