Updated almost 12 years ago on . Most recent reply
I own a second mortgage that isn't paying, what to do?
A few years ago I sold a house to a couple that asked me to take back a second, since they could only quailfy for a 80% loan. I did and now they have stopped paying me, but they are still paying the first wich is a local bank with 2 branches. I contacted a attorney to start foreclosure. Yesterday I get a call from the attorney's office telling me that the local bank said that they would call the first loan due if I foreclosed on my second and took the house back. I had heard before that a second or junior lien holder could legally a make the payments on a senior lien in order to protect their position. My attorney doesn't know if this is correct or not. So I need some advice above and beyond someone telling me go talk to an attorney.
Most Popular Reply
Lenders in junior position who foreclose and take the property back subject-to a senior lien are not exempted from the due-on-sale clause. (See Garn St. Germain). So the due-on-sale clause can legally be triggered by taking the property back at sale or by a deed in lieu, whether or not you bring the payments current. The lender has the right to call the loan due based just on the transfer. The bank is letting you know they believe there is equity and that they will pursue it if there is a due-on-sale event. As a lender I'd do the same thing.
If I were you, I wouldn't foreclose unless I was sure I could pay off the first if they call it due....and there were enough equity to make the payoff worthwhile. I wouldn't play with wrap ideas if I knew the senior lender would prefer to foreclose.
Just my opinions.
If I were you, I wouldn't foreclose unless I was sure I could pay off the first if they call it due....and there were enough equity to make the payoff worthwhile. I wouldn't play with wrap ideas if I knew the senior lender would prefer to foreclose.
Just my opinions.