2nd lien foreclosure and risks on first

4 Replies

Just looking for opinions here.  I am looking at buying a foreclosure on a second lien.  I am wondering how much of the risk is in the unknown in the first.  The first had NOS sale out three years ago and a week later it was cancelled.  I am assuming they paid what was due but I understand loan mods don’t have to be recorded so there is a chance they worked something out with the bank and they may have a larger loan amount than implied in original deed of trust.  Any thoughts? 

The risk of not knowing all the existing encumbrances (all kinds of liens or other interests ) - on the real property is really huge. It might not make the investment efforts worthless if the superior liens exceed the equity value of the real property.  The easier way is to look up in the records of County Clerk's office for the recorded mortgage or loan modification under the borrow's name. Depending on the state, foreclosure proceedings require original/recorded note/mortgage documents. Since most notes/mortgage change hands frequently, most lenders will get their instruments recorded.  If the self search does not turn productive, try the paid service on CoreLogic which gives a summary information on the property interest details. If you are really serious about the investment, use title company to conduct title search on the property to get a whole picture of all the liens and chain of title history of the property. 

Check title and ensure you are buying into a favorable position. Risks include but not limited to buying a poor position ( no equity ), horrible property condition, no exit strategy, evicting occupants, getting foreclosed on by a senior MTG. 

I am specifically interested In the odds and risk of a loan modification not being recorded. NOS followed quickly after 90 days of NOD and then all cancelled a week atfer NOS recorded. My guess is they did not get a loan modification and then agreement to cancel sale. Is this something I should not worry about (ie worry about higher balance than implied in deed of trust)?

Originally posted by @Jing Yang :

The risk of not knowing all the existing encumbrances (all kinds of liens or other interests ) - on the real property is really huge. It might not make the investment efforts worthless if the superior liens exceed the equity value of the real property.  The easier way is to look up in the records of County Clerk's office for the recorded mortgage or loan modification under the borrow's name. Depending on the state, foreclosure proceedings require original/recorded note/mortgage documents. Since most notes/mortgage change hands frequently, most lenders will get their instruments recorded.  If the self search does not turn productive, try the paid service on CoreLogic which gives a summary information on the property interest details. If you are really serious about the investment, use title company to conduct title search on the property to get a whole picture of all the liens and chain of title history of the property. 

 The only thing you said that made any sense, or had any semblance of being correct was your last sentence.

Get title work done so you can know recorded liens and lien position. Beyond that, unless you have the mortgage statements from the borrower, the amounts due or owed are a guess.