Purchase Property with Junior mortgage extinction clause

3 Replies

In the process of closing on a property and I get this email. "There is a junior mortgage loan that is still on title, and will not be removed until 9/10/2019. There is a one year right of redemption from the date of foreclosure on government loans.


Please understand, we can only close if you agree to sign a Hold Harmless. We will take exception to the lien on your title policy. This means we will not be held responsible if HUD decides to redeem the property."

Has anyone been through this process on purchase , One side of me says, its HUD they won't redeem. But then I have an issue in the event I attempt to flip the property until 9/10/19.. Thoughts

Originally posted by @David Ho :

In the process of closing on a property and I get this email. "There is a junior mortgage loan that is still on title, and will not be removed until 9/10/2019. There is a one year right of redemption from the date of foreclosure on government loans.


Please understand, we can only close if you agree to sign a Hold Harmless. We will take exception to the lien on your title policy. This means we will not be held responsible if HUD decides to redeem the property."

Has anyone been through this process on purchase , One side of me says, its HUD they won't redeem. But then I have an issue in the event I attempt to flip the property until 9/10/19.. Thoughts

David, if you're trying to flip the property, I would avoid it. HUD is unlikely to redeem it but what if it does? Then all your effort goes down the drain and you will only get back your purchase price. If there are no other deals in your city (that is unlikely - there got to be more deals there than this), then by all means take the risk on this one. But, to me there are always better deals out there - that don't have this risk hanging over my head.

@David Ho As you are already so close to closing I guess it makes the decision even harder. Let me give you my two cents on the matter though. If this purchase isn't too hard on your working capital you can look to buy and hold it till the hold is removed. Other than that I'd definitely suggest cutting your losses and searching for a better deal.

Good Luck! 

I am going to flip it. The property's junior is only 20k .. Upon closing on the flip... I'll just escrow it until September and it will return to me ...

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