Second Lien Position on Impending Foreclosure in NY, Need Advice

[Dimple Khurana]

Hello. I am a second lienholder on a property in Long Island, and I am looking for advice on how to navigate the situation.

The property: Original Loan Value with Chase: 1.3M. Second Lien Position: 700K. Current market value: $2.5M 

Property In foreclosure since 2009, owner has managed to pay lawyers to keep extending the proceedings since his last payment in 2009. I feel they are nearing the end of the window, and not sure what will happen to our lien position if this goes to auction. 

How do I find out the following: 1) Are there other lienholders ahead of us on the property? 2) What is the latest status of the foreclosure? 3) what is the first lienholder's current payoff amount? 4) Whom can I hire to negotiate with the first lienholder if we want to buy out the property? 

[Jon Holdman]

You absolutely need to make an appointment with a foreclosure attorney in the area.

If this goes to auction any lienholders junior to the foreclosing lien are wiped out.  With those numbers I would expect there would be bidders and someone besides Chase would win.  if there is excess from sale after paying off the Chase loan and all their costs, you would be in line for that.  Assuming you're next in line after chase.  A title company or title attorney can do a search and give you exact information about your position.  The trustee who's doing the foreclosure should be able to provide status info.  I would think you would be getting notices from them since you're a lienholder.  This stuff varies from state to state and I'm not up on the specifics of the process in NY.  You would be notified here in CO.

Shortly before the auction the lender will declare the amount they're owed or the opening bid.  Before that, perhaps the trustee can provide some info.  

You cannot buy the property from the first lienholder.  They don't own it until after the foreclosure.  You would need to negotiation with the current owner.  They seem to have significant equity, even adding in the costs of the foreclosure.  IDK why they don't just sell it.  Even at a fire sale price they could net some cash and avoid a foreclosure.

What does your note say about the first foreclosing?  That's often a default condition which give you the right to foreclose, too.  If you can foreclose first and take it to sale before the Chase loan, and there are no bidders then you could take possession of the property subject to the first.  Then you would simply pay off the first and have the house.  

Given those number, the first really has no incentive to discount their loan.  So you should plan to pay them the full amount they're owned, whether after foreclosing yourself or negotiation a sale with the owner.