Learning how to understand mortgages in the court records

20 Replies

Reading and understanding court records is paramount for bidding on foreclosure auctions.

I am not absolutely certain I have grasped it. I'm not in full understanding presently, like when there are several mortgages recorded on one property. 

I am a slow learner. I need things spelled out for me. I honestly think I have an undiagnosed learning disability. 

If I have something in writing, I can read it 5 times until I finally understand and once I learn something, I seldom forget it.

I have been trying to find some sort of instructive article online that explains how to read and understand the court records but I cannot find such information. Can anyone point me towards such a website perchance?

My other question is, do the owners personal debts affect the buyer? For example, I keep seeing owners who have a judgement order against them for an unpaid hospital bill. One person had a 150K debt owing for a hospital stay! Would that in any way affect me if I bought the property? Does this debt stick to the house or just the person? 

@Nat C.

As a simple law when checking records always follow the timeline. 

E.g. Multiple mortgages on the same property are taking their place based on the date they've been signed(not recorded). 

Don't have any resource on hand for a step by step guide nor did i see one.

For your other question, that is a personal debt if the judgement doesn't mention a lien against the property but you can only find that out from the court records. 

If it's not a lien against the property it won't stay with you as the new buyer.    

Edit: Check the following thread and follow some of the links in Steve Babiak's post, you might find some things answering some of your questions:

http://www.biggerpockets.com/forums/41/topics/4462...

A recorded judgment is a lien against all real property owned by that person/entity.  But, it acts like any other private lien, it is ranked as to the date of recording.  If recorded after the mortgage that is being foreclosed, and the judgment holder is named/served as a defendant, then it gets wiped out, from the property.  Also to note,in Broward county,  a county code violation lien attaches toAll Broward properties owned by that person/entity.

It depends on who is foreclosing. If it is a mortgage company and they are foreclosing then they get paid and if the price at sale does not provide for anyone else getting paid then its over. You get the property for what you paid. The personal lien goes on to follow the person wherever they are at on whatever other property they may own. That is my understanding of it. 

Originally posted by @Florian N. :

@Nat Chan

As a simple law when checking records always follow the timeline. 

E.g. Multiple mortgages on the same property are taking their place based on the date they've been signed(not recorded). 

Don't have any resource on hand for a step by step guide nor did i see one.

For your other question, that is a personal debt if the judgement doesn't mention a lien against the property but you can only find that out from the court records. 

If it's not a lien against the property it won't stay with you as the new buyer.    

Edit: Check the following thread and follow some of the links in Steve Babiak's post, you might find some things answering some of your questions:

http://www.biggerpockets.com/forums/41/topics/4462...

 Hi Florian, just a prelude, I would like to re-iterate I'm a slow learner.

Can you please confirm if I am understanding correctly?

Scenario 1-

John takes a mortgage out from Bank of America in 2000.

He takes another mortgage out from Wells Fargo in 2002.

Bank of America forecloses in 2015. I am the winning bidder at auction. I am not responsible for the Well Fargo debt?

Scenario 2-

John takes a mortgage out from Bank of America in 2000.

He takes another mortgage out from Wells Fargo in 2002.

Wells Fargo forecloses in 2015. I am the winning bidder at auction. I have just stuffed up and now own the Bank of America debt?

Scenario 3-

John takes a mortgage out from Bank of America in 2000.

He takes another mortgage out from Wells Fargo in 2002.

John transfers the original mortgage from Bank of America to Suntrust in 2007.

Suntrust forecloses in 2015. I am the winning bidder at auction. I am not responsible for Wells Fargo debt?

Originally posted by @Wayne Brooks :

A recorded judgment is a lien against all real property owned by that person/entity.  But, it acts like any other private lien, it is ranked as to the date of recording.  If recorded after the mortgage that is being foreclosed, and the judgment holder is named/served as a defendant, then it gets wiped out, from the property.  Also to note,in Broward county,  a county code violation lien attaches toAll Broward properties owned by that person/entity.

 Thanks Wayne, I know that all code violations and any liens with the city stick with the property no  matter what and the new owner inherits that problem. 

Can you please confirm that my little scenario set out above is correct? I'm sorry if I'm asking the same questions over and over, I just want to make sure I have this down pat.

@Nat C.

Lesson learned.. its really very simple

there is a saying at least I learned it mid 70s   and that is FIRST IN TIME  and to follow that is RACE to the RECORDERS office.

any debt that is JUNIOR  recorded in TIME after the foreclosing instrument is extinguished.

With exceptions of course of Super liens and those you need to check on your state as they are state specific.

IRS liens .. but they sunset in 120 days or so.. I have never had the IRS redeem a property I bought at auction and I bought my first ones in the late 70's.

so for all intense and purposes if you have a BOA loan recorded in 2000 and you have all manner of other liens and judgmetns or mortgages recorded after this they will get extinguished at the sale.. 

AS stated only a very few remain and you just need to check on your state which those are.

Originally posted by @Jay Hinrichs :

@Nat Chan

  please let us know if you actually buy one at auction its pretty dog eat dog in the big counties nationwide

 I assure you that the BP community will be the first to know of my win! I have a strong feeling I will be acquiring a property through this avenue.

I really feel the move to have everything online has taken away the 'dog eat dog' phenomena. I think that was done intentionally. 

Do they still hold auctions 'on the courthouse steps' in other counties?

Originally posted by @Wayne Brooks :

@Nat Chan For 1, 2 and 3, yes you are correct.  (Except ist's not "transferred" by John....BOA sold (assigned) it to Suntrust, without John's permission).

 Awesome, thank you. I feel a lot more confident now.

@Nat C. I really like the fact that you're dulling down deep into this topic like few people will do.

Here's a resources that you can use: historic interest rates for loans since pre-war years. Find it at foreclosure forum dot com.

Now a word of warning: since all real estate laws are unique to state, Florida's laws will not apply to tgat website's predominantly California info. However, the interest rates are spot on.

What I do is use the figures to estimate the loan balance at prevailing loan rate and try to buy subject to the old loan. I'm working a property with a loan this week that was originated in 1984 and has a balance, despite being 31 years old!

Remember that junior liens may or may not be extinguished after sale. In CA, most of the liens remain but are no longer attached to the real estate if foreclosure occurs on a senior lien (does not apply to purchase money loans, for example).

Study the FL title laws and remember the difference between buying at foreclosure or buying from a defaulted property owner prior to sale.

@Nat C.

Here are some of the liens that survive the foreclosure sale:

Government Superior Foreclosure-Liens:

IRS-under special circumstances (under 120 day redemption period from deed recording). If IRS does not exercise its redemption right within the 120 days it will automatically expire.
Department of Treasure
State Tax Lien
Lien by USA or Dept of Justice
US Department of State
Other Federal Agencies

Frequent Superior Foreclosure-Liens:

Code Enforcement for debris removal or mowing
Demolition or Environmental Based Liens
State child support lien
Utility Liens
Water/Sewer Delinquency (only in selected states)
County (and/or School/Township) for unpaid taxes

Here are some of the judgment and liens that will be wiped off from the property (not the borrower who lost the title) if the lien holders were properly notified and "had the right to bid on the property at the auction":

2nd and junior position mortgages, such as home equity loans, etc...
Credit Card Judgments recorded after the foreclosing mortgage
Personal Judgments recorded after the foreclosing mortgage
Mechanic's Liens recorded after the foreclosing mortgage

Hope this helps.  Let's try to reconvene on our call later this week.  

Thank you soooo much for all the information everyone. 

Researching the mortgage history can be very time consuming. When the court records are 10 pages long and there are multiple mortgage transactions, it's quite tedious.

Yesterday there was a property where I could not find the origin of the mortgage on the bank that was foreclosing so I didn't bid. 

Another property had over 20 AMO (assignment of mortgage), SMO (satisfaction of mortgage) and MOR (mortgage), with different dates overlapping, so I just stayed away from that one as well.

I'm bidding on around 10 properties a week and usually bidding half way between the listed appraised value and the judgment order. I obviously research comps and everything to decide what to bid.

Something curious is that many properties I look up online are already listed as pending on the MLS. Usually these are the properties in the hot areas. My assumption is a realtor gets the property under contract when they see the lis pendens and secure a buyer.

In this case is it useless bidding? If the bank already knows they have a buyer, they will make sure no one buys the property in the auction. 

@Nat C. These "pending or contingent" listings are normally short sales, and the odds of the sale being canceled are usually less than 50/50.

When you can't find the mortgage being foreclosed on, it's usually a mortgage from the previous owner, and they did a QCD/sub2, or occasionally there is a misspelling on the mortgagor's name...another monkey wrench.  Sometimes the LP identifies the mortgage recording number, sometimes not.

In the interest of reducing research time, would this method be acceptable to find the senior mortgage- 

The online foreclosure auction website lists Party Details (defendants and plaintiff).

Under Defendants lets say Wells Fargo is listed.

One could do a scroll through the court records and see that Wells Fargo was the lender at the time the deed was recorded or even just listed prior to the plaintiff, then we could safely assume the plaintiff is a junior mortgage.

Yes?

Also let's say the City is listed as a defendant then we already know there is a lien from the city. When a person is listed as a defendant (who isn't the owner/borrower), it's probably a tenant?

Nat, that's for a "first look", but that could get you in trouble if you didn't look further.  Assignments, the same bank having the first and the second, etc.

Originally posted by @Wayne Brooks :

Nat, that's for a "first look", but that could get you in trouble if you didn't look further.  Assignments, the same bank having the first and the second, etc.

 Yikes, I would definitely not just look at the defendant list and leave it there.

If Bank America is the first lender and then they give a second loan at a later date and then they foreclose is that not counted as the one party? 

@Nat C.

 It happens that the same bank has 2 mortgages and they might foreclose on the junior instead of the senior. There is no rule/law that i know that they have to foreclose on the senior lien.

To save time i would recommend looking the recorder of deeds up first and verify that the foreclosing lender is the one with the senior lien first and then verify that is the same lien that is being foreclosed is the actual senior and not a junior lien. 

In cases where you can't find the mortgage try and and change your search, eg. instead of searching for John Smith try and search for John Sm and take it from there. It happens that the name gets misspelled and won't show up on full searches. Same goes for other details.