First position and second position to foreclosure

7 Replies

Hello,

Say there is a first note and second note on a home if they buyer gets foreclosure by the first position what happens to second position loan does he get paid by the loaner in the first position if there is equity or can second position become borrower and keep paying the first position or ny law the home needs to be sold for first and second position to get paid?

In a foreclosure by the first, the second gets wiped out....if the suction bid was for more than the first was owed then the second would get the surplus funds. 

So with the fore closure by the first the. The lender first cannot keep the home and rent he needs to sell immediately to pay off the second if there is more equity than the first loan?

@Horacio Gutierrez No.  The first mtg will only bid up to what they are owed at the auction.  If the first mtg holder gets the property back then it was for Less than what they were owed.  If a third party, investors, bid the price up Above what the first mtg is owed, then the first mtg gets what they are owed, the second mtg would get the balance (surplus).

Hypothetical scenario:

1st lien - 100k

2nd lien - 30k

market value - 200k

The property gets sold at an auction for 100k. The 2nd position is wiped out. I come to the homeowner before the redemption period is over and he signs off a deed to me. I pay the 1st lien 100k. What about the 2nd lien? 

Originally posted by @Felix Shraga :

Hypothetical scenario:

1st lien - 100k

2nd lien - 30k

market value - 200k

The property gets sold at an auction for 100k. The 2nd position is wiped out. I come to the homeowner before the redemption period is over and he signs off a deed to me. I pay the 1st lien 100k. What about the 2nd lien? 

My opinion would be you owe on the 2nd then because the senior lien foreclosure was redeemed. You take the deed subject to the 2nd and now they can foreclose on you if you don't pay them off.