Forclosing On A 2nd Lien In Georgia

6 Replies

We are about to have our sale dates next month on six 2nd non-performing 2nd liens in Georgia we are foreclosing on, and our attorney tells me that we can't include the total of the first lien in our opening bid, only what we are owed with arrears, and the money flows down to subsequent liens, and NOT up to the first. 

I am slightly shocked about this, especially if there are no other bids, and it reverts back to us as the new senior liens. 

Anyone have any advice or comments on their experiences foreclosing on a junior lien in Georgia?

This sounds right, it works that way here unless there are no junior liens, then the surplus goes to the first.  The reasoning is that junior liens gets wiped out, but the first is still in place. However, in hoa Foreclosures oddly enough, surplus goes to the owner.  Maybe @Dion DePaoli knows what happens to the surplus with no junior liens, in GA. Not sure what you mean by the "reverts back to us as the new senior liens".  If you took it back, it would of course be sub 2 the first.

@Wayne Brooks , i mean that if no one else bids, we should now be the senior and the senior is now the junior, correct? I am waiting to hear from our other Attorney to confirm. The first attorney says we can not set the bid higher than what we are owed, even though we want to set it at the payoff for the first, and our payoff. If we can get what we are owed, I really don't care, as our lien is gone, though I hope bidders realized its a 2nd lien and not a 1st... @Dion DePaoli , can you weigh in on this if you can?

@Christopher Winkler No, you do not "become the senior" lien holder.....your lien no longer exist, and you would now be the owner, subject to the existing first mtg. Actually you hope some dummy doesn't realize you are second, and bids the full amount, paying you off.

Luckily we can quickly evict, as one guy has been sending off point QWR requests for years, delaying the enevitable, and our attorney shredded it to bits, as did our servicer, Land Home. Thanks! Hopefully some will be outbid, as we will then have to manage 6 properties and get them cleaned up and rented or sold, though a couple are spectacular and we would love to "own" them...

@Christopher Winkler Where are the properties at? If any are up in my area and they're not underwater on the first I'd be happy to help out with the eviction, securing, management in exchange for first crack at buying them.

A lien with a right of foreclosure may only foreclose those interests which are inferior to the lien.  So a second lien can not foreclose a first.  Surplus does flow down from the lien which forecloses not up.  The reserve price is limited to what has been capitalized by the lien holder not what is due on the property.  Had you actually paid off the first lien, because those first liens jeopardize your lien position, prior to filing, then you would have a potential claim within the rights of your security instrument to include those funds.  However, you did not advance funds for those liens (not capitalized) so you are not owed those funds.  

As @Wayne Brooks suggests, upon the conclusion of your auction your lien will be extinguished, barring any post sale right of redemption (not present in GA), you then would take title subject to any senior liens or interests.  There is no such thing as "..we become the senior and the senior becomes the junior...", this would suggest a swapping of priority in title which doesn't happen, ever.  

Whether or not there is any value in purchasing any of the interests at auction from a second lien has much to do with the amount of equity remaining in the property.  

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