Is the loan being foreclosed on the first and only?

Question

Ok, how ' bout this situation. The county's website is showing a property going to foreclosure with a loan balance of 119k. Zillow has this prop appraised at 164k. So about a 33% equity position. The 119k loan was recorded as a deed of trust on 12/22/04 as a conventional 5.5% adjustable loan. Am I safe to assume that this loan is a first? The clerk and recorder had lots of confusing info on this prop. If it is a first what happens to to the 2nd loan, tax liens, mechanics lien etc (if any)? Is it worth to hite a title company just to make sure that there is only one loan against the prop? I live in CO.

Jason Barnett · Answer

Are we talking pre-foreclosure or post-foreclosure?

After the foreclosure is finalized the title will be clean with the exception of IRS tax liens and property tax liens.  Preforeclosure you will need to contact any and all lienholders and arrange for some sort of settlement.

N/A N/A · Answer

What happens many times is that the holder of the 1st lien will file the NODs, but the holder of the 2nd will just wait to see what happens. Some lenders that do 2nds dont even report the loans to the credit reporting agencies, like Residential Capital, who specializes in hard money 2nds. When a lender who holds the 2nd lien has to foreclose and pursue their cash, it typically costs around $35,000, so many of them just wait and let the holder of the 1st go through the preceedings and wait to get paid.

If you buy the house without talking to the holder of the 2nd lien, you made a big mistake. You are going to have to pay them. The only way to settle that 2nd lien for less...or the 1st lien, is to have the home owner notify the lender that they have a buyer and it will be a short sale because the owner can not make payments and has exhausted all his resources. If you go through this process right, the 2nd lien holder may consider wiping the loan clear for a small fee, sometimes as little as 10%. The least a 1st lien holder will usually settle for is 82% of the lien minus the costs of proceeding with the foreclosure. Also, they will not do this if the holder of the 2nd is being paid in full.

haha..big deep breath....good luck on your deals!!!

Jason Trindade
858-692-4909

Jim Gordon · Answer

Never assume anything on a foreclosure property, do your DD on the property and make a trip to the recorders office if you need to. Also don't count on the value that you get from zillow to be very accurate. Find a local realtor that you can work with and have them run a CMA on the property. It is easy to get a range price without seeing the property. When you find a Realtor that you can work with as part of your team keep them in them loop.

N/A N/A · Answer

Hey, I am a newbie myself, but from what I understand, it is usually prudent to do some SERIOUS research on liens on properties.  Sounds like your 119k loan in default is in first position, just from simple math (if that was second, a first would probably be a larger amount, unlikely given your 164k estimate).

I believe that if the first loan is foreclosing, the second (and even others if on title) will be wiped out, but certainly tax liens, and perhaps mechanics liens will REMAIN on title and you could be responsible.

Just some theory for you, don't quote me on anything.

N/A N/A · Answer

In that situation I think it’s safe to assume that is a first position loan.  There’s no need to hire a title company in the research stage.  Just go to the courthouse and find the information yourself.  Most counties have all of the deed and lien information on-line.