Preforeclosure Home Equity Line of Credit Negotiation

10 Replies

I have a property under contract, my attorney discovered a home equity line of credit for $30,000 on the property with an additional $10,000 in unpaid fees. This property goes to auction on the 22nd which is Tuesday. With this additional debt added, it could break the deal, and the seller will let the property go to auction. 

My question is this:

In negotiating with this lender for the second mortgage, how likely am I to be successful to work out a deal before the auction date? If it is possible to do this, what is a reasonable amount to offer? I've heard that this junior mortgage will get wiped out and that they will then receive nothing if that happens when it goes to auction.

I would greatly appreciate any experts advice and guidance on this.

If you could somehow show the 2nd position lender that they will likely get nothing upon the sale at auction, its likely that they will negotiate. I think it depends on the property's as-is value and the first mortgage balance
Originally posted by @Jason D. :
If you could somehow show the 2nd position lender that they will likely get nothing upon the sale at auction, its likely that they will negotiate. I think it depends on the property's as-is value and the first mortgage balance

 That tactic rarely works in today's world. They are already getting nothing. Telling them what they already know doesn't motivate them. Sometimes, getting nothing is better in the sense that if they get wiped out in a senior lien foreclosure, their deficiency rights are preserved and they get to take the borrower to court and sue them for the full balance. They get a judgment. They may not collect today but, having a judgment sitting around waiting to attach to something is many times much greater than the $1,500 or so that you are going to generously offer them.

Originally posted by @Jason D. :
@Ron S. all good points. Sometimes creditors will take what's in front of them over what could be. They are in foreclosure for a reason, so why not give it a try?

 I get your point, and it's a valid point. It's just that today, it doesn't work much any longer. 2012? 2014? All day, every day. 2018? Not so much.

So as an update, just wanted to let you guys know that I called the lender and negotiated the amount from $41,000.00 down to $15,000.00. So we have a deal. Not sure how common this is or whatever as this is my first actual deal, but it is possible it appears.

Originally posted by @Reuben Royal :

So as an update, just wanted to let you guys know that I called the lender and negotiated the amount from $41,000.00 down to $15,000.00. So we have a deal. Not sure how common this is or whatever as this is my first actual deal, but it is possible it appears.

 Congrats...that's almost .40 cents on the dollar for the junior. Sounds like a win/win, especially considering the junior wrote off the entire amount long ago. They get to book recovery and you get a property and the homeowner gets a second chance to move on.

Ditech postponed the foreclosure auction for tomorrow, even so, we still have a 10 day upset period and we're under contract at the attorney stage right now, hopefully set to close on Thursday. She pockets a few thousand at the end of it and we get a decent property. I think it worked out well because of the close timeframe, and the junior mortgage company probably didn't have a lot of time to negotiate or try and research the situation too much. Whatever the case, it worked out