Buying a Mortgage Note and how to leverage it

23 Replies

Hello, I am looking into buying a Mortgage Note and have a verbal agreement with the bank.  The property has been abandoned and unpaid for almost 10 years.  I was hoping to buy the Note to be able to do an environmental study before foreclosing the property.  However, I am learning that by owning the note does not give me the right to access the property.

Is there an innovative way to facilitate an environmental study if I buy the note?  


Also, I would be purchasing the note from bank first in line, but there is a municipal lien in first place.  If someone else attempts to foreclosure the property, what is the risk of my position?

As a matter of law, it is not possible to trespass when property has been "abandoned".   So an owner who has expressly or implicitly "abandoned" RE has no standing to complain about what another does with it.   If, it is abandoned, then not only you, but anyone has the right to access the property.  In States like mine, WA.  Abandonment of real property is a written as a recognized defense right into our trespass statute. 

RCW 9A.52.090

Criminal trespass—Defenses.

In any prosecution under RCW 9A.52.070 and 9A.52.080, it is a defense that:(1) A building involved in an offense under RCW 9A.52.070 was abandoned; or...

Thank you Davido, so does this mean that I can do an environmental study on the site if I have the intent to buy the NOte and/or foreclosure without permission by the current owner?  And what value does buying the mortgage note really give me in this situation?

@Ray Hayward

As the note holder you have the right to protect and maintain the asset. Typically you can post a notice on the door to confirm vacancy then you could go in and change locks, winterize it and basically do what you want. So yes you could do a study

With owning the note, you still will need to foreclose. Municipal lien will need to be paid, if there was a 2nd or junior lien that foreclosed you would get paid from the auction.

Also this depends on the state and if their is an HOA and HOA liens.

Before ever buying a note make sure you run title report. Also if the report is clean or has liens that survive foreclosure an alternative is a deed in lieu. You could find the borrower and offer them $1000 to sign the deed over to you. This would then avoid a lengthy foreclosure and legal costs. If it is vacant from the bank I would make sure it is heavily discounted based on the value of the home. In a lot of locations homes may have had power turned off and thus sump pump is off and you have a pool on the basement and a penicillin farm (mold) throughout the house

@Chris Seveney 

Thank you for your reply. If someone foreclosures on the municipal lien, would I only be able to recover what I paid for the note after negotiating with the bank?  Or would I have the chance to foreclosure and/or sell the note for a higher price?

I actually did have an agreement with the owner who does not want to renew. I only had enough time to do a phase  1 study and am looking for another way to have rights to the property.  



@Ray Hayward , there is too much information we lack about this situation, and about what you are trying to do and why. 
My reply relied on these words in your original post, "The property has been abandoned and unpaid for almost 10 years."
In regard to your question on whether "abandonment" means you can ... "can do an environmental study on the site if I have the intent to buy the NOte and/or foreclosure without permission by the current owner?"  

The answer would be yes if the property was actually abandoned.  Yet from your subsequent comment to Chris Sweeney, "I actually did have an agreement with the owner who does not want to renew."  It is clear that the owner has not abandoned the property in the legal sense.  Instead, he has retained an ownership interest in the property, because "the owner ... does not want to renew" an agreement with you.

The abandonment that is recognized by a court as a defense against trespass requires the property owner's intent to give up all his rights to the property?  Courts begin with a presumption that owners generally do not abandon valuable property. If the matter was litigated, you would have a defense to a charge of trespass if you establish from the preponderance of evidence (witnesses, documents, and established facts) that you present in court that the owner intended to abandon or give up all rights to his/her property.   

However, as a practical matter, isn't it highly unlikely that the owner of a property that has been vacant and unpaid for 10 years is going to spend money to sue you for accessing the property to do an environmental study?  More importantly, and more simply, as @Chris Seveney has pointed out, a mortgage holder has the right to access the property to "protect and maintain the asset".   

So it appears that the property is not abandoned, the owner has stopped cooperating with you, and you want to do the environmental study -before you spend the money to buy the note?  If that is the case, then prepare a simple, short agreement between you and the mortgage holder that you are to inspect the vacant property, as their agent, and estimate the cost to preserve it. Then schedule your environmental study to be done on the day you'll be there to do the inspecting and estimating for the mortgage holder.


 @Davido Davido

Many thanks for your reply. Here is a little more on the back story …

What happened is the owner of the building passed away in 2010. The property was seen as a liability so the property was not part of probate. Since this time, the family has not paid the mortgage or municipal taxes, the building is rotting away. I did create an agreement with the decreased owners wife (Arguably next in line?) to access the property. I did a Phase 1 and now want to do a Phase 2. However, she does not want to extend the agreement. She has no intent to do anything with the property.

Does any of this new information change your recommendation/approach?

The other point is that I did ask the bank for the ability to due diligence between the time of my deposit and closing date, and they said they do not have the right to grant this access.  Thoughts?

@Ray Hayward ,  Let's not just assume your acquiring a 1st mortgage.  Did you do as @Chris Seveney stated and "Before ever buying a note make sure you run title report. ....(and check for) liens that survive foreclosure."  This property has unpaid property tax liens.  Those are senior to the mortgage.  They must be paid.  So definitely run a title report.

Second, verify whether the Mortgage is beyond or close to the Statute of Limitations (Your State's limit on when courts stop enforcing unpaid debts).  See 

https://www.nutter.com/trending-newsroom-publications-Statute-of-Limitations-for-Mortgages-Referencing-Maturity-Date-of-Underlying-Debt-04-17-2015

It could be that the mortgage is already unenforceable, or will be soon.  If so, that would be an excellent bargaining tool.  Tell the bank it is essentially worthless and renegotiate with them to acquire an assignment of their interest to you for a very small amount.  Whether or not you acquire the mortgage holder's interest, feel free do your environmental study.  No one is going to complain.   Then decide whether to proceed.

If you decide the property is worth acquiring, then go back to the widow with cash.  Have a mobile notary standing by and have a prepared "Deed in Lieu of Foreclosure" (if you acquired the mortgage), or a "Quit Claim Deed" if you don't have the mortgage.  Offer her a hundred cash, or two, or five, or $1000 as suggested by Chris, to get her to sign away her interest, if any, in the property.

Note that since probate was not done after the owner's death, a deed from the widow won't transfer clear title.  You'd still need to do either a foreclosure, or probate, or quiet title suit to get clear title.  But with the widow's interest deeded to you, getting clear title should be easier.  If you get either the mortgage note, or widow's deed, then ask your title company how they want you to proceed in order for you to get an insurable title.

If the widow refuses to sign a deed, then your option is to get an assignment of the bank's interest and foreclose.  Be sure to get a statement from the bank of payments they've received so you can calculate the amount due, including the unpaid interest that has accumulated for ten years.  You could also wait and buy the property at the eventual municipal property tax foreclosure sale. The past due taxes have to be paid anyway, so if you can wait until the tax foreclosure sale is scheduled, then you could buy the property without paying the bank.  

As a last option, you could even just take over the property as your own -without title and without buying either the note, or a deed (this is risky because if someone else buys either, they'd have rights to the property).  In MA, if you treat the property as your own for 20 years, you can eventually file suit for title via adverse possession.  https://www.mass.gov/info-details/massachusetts-law-about-adverse-possession  But even in that case, you would need to pay the property taxes as necessary to avoid tax foreclosure.   

In regard to your question, "If someone foreclosures on the municipal lien, would I only be able to recover what I paid for the note after negotiating with the bank? Or would I have the chance to foreclosure and/or sell the note for a higher price?"


No. Generally, you would get nothing.   If you own the mortgage and want to protect it, then you have to make certain the property taxes are paid, when the property owner does not.  However, if you own the mortgage and foreclose yourself (before the municipality), then you would be entitled to receive all the money that is bid on the property at the foreclosure auction up to the full amount of the principle due on the note, together with all accumulated interest -no matter how little you paid for the note.  

And, after foreclosing the mortgage you'd be the owner of record (unless someone bid more at the foreclosure auction than you were owed).  You could then decide whether you wanted to pay the property taxes or let the municipality foreclose for property taxes.  With you as the owner when the municipality foreclosed for taxes, you would also be entitled to any overages (amount bid in excess of the taxes) resulting from the municipal property tax foreclosure sale.

@Ray Hayward  

"The other point is that I did ask the bank for the ability to due diligence between the time of my deposit and closing date, and they said they do not have the right to grant this access. Thoughts?"


The mortgage holder has the right to protect their asset. The person you are talking to at the bank may not know that, more likely thought you were attempting to access the property for a different purpose than to protect their asset, and also more likely isn't willing to take any risks for a property that they've already written off.  

None of that matters.  Go do what you want with the property.  Unless there is something you haven't communicated, no one will care.  The widow "... has no intent to do anything with the property."  She won't sue you.  The bank gave up on this property years ago and knows that they will loose their interest in it when the municipality forecloses for unpaid property taxes.  The bank won't sue you. So just go do what you need to do.

Question for you.  When was the last time the property taxes were paid and who paid them?  Why hasn't the municipality foreclosed in almost ten years?

Hi,

Thank you sincerely for all your insight. I have been working closely with the Town economic developer who says that the Town does not want to foreclosure on the property as they are concerned of the contamination and view the property as a liability. They also claim they do not know who the current is. Researching the Registry of Deeds and Town documents, everything is still in the deceased husbands name. However, through speaking with the Widow and her Lawyer is how I found probate was never done. Studying the Registry of Deeds, they owned a lot of properties and seems they made some creative transactions to pull out as much cash as possible and for lack of better words, it seems they made this building the “catch all” for debt. The building is over 2 parcels, so there is 2 municipal liens, 2 Bank Liens, and 1 promissory note. I did work with a Lawyer which is why I feel we have found the first in line bank. Since this was sporadic pro-bono work, I do think the recommendation of a Title Report would give me more confidence.

I did reach out to 2 Title companies in the past. Both would not work with me because I am not a Lawyer. Does this seem strange to you? Do you know of any companies that would work with me on this?

I spoke to the widow as recently as yesterday in attempt to renew our agreement for due diligence, this time offering cash in advance, yet she is still not interested in renewing. I wonder if she is concerned of liability based on findings?

The most recent mortgage is from 1998, so in studying your message, it seems my best approach is to:

  1. 1. Get Title Report
  2. 2. Get the environmental study done
  3. 3. Negotiate with Widow to obtain her position
  4. 4. Negotiate with Bank to obtain Note
  5. 5. Foreclosure the property

I am very surprised I could randomly do a study on the site. Would the environmental company ask me for documentation with right to access?

Regarding the Municipal lien, is it true that I could negotiate a deferred payment plan with them and/or only pay principal (Meaning they can elect to forgive interest)?

 @Davido Davido :


Another question, if I acquired the promissory note, which I believe is last in line, would I still be able to foreclose with this?  I have negotiated with the bank to which seems like a very fair price.  But the promissory note is significantly less and I have been in contact with the holder and think I could purchase the Promissory for much less than the bank note.


Hello@Ray Hayward

About title companies not wanting to work with you, -you asked; “Does this seem strange to you? Do you know of any companies that would work with me on this?”

Yes it seems too strange. Is it possible you misunderstood what they were saying? Title companies do not provide legal advice and you may have been asking them legal questions. However, title companies do provide title insurance. Did you ask them the cost to get title insurance on the property(s)? I have no doubt that both Title Companies would provide title insurance on this property if that is what you ask them to do because that is the business they do.

No I do not have a title company to recommend for you to work with in MA, because I’m on the opposite end of the county. Many Title company’s are national, and I’ve used nationwide title companies like First American, Chicago, and Stewart in the past, but lately I use only our local company, -Thurston Title, which won’t be of any help to you.

You mentioned speaking to the Widow and offering her cash to renew a previous agreement for “Due Diligence”. She declined and now your wondering whether “she is concerned of liability based on findings?”. Yeah. I’d be wondering the same thing, especially since, “the Town economic developer … says that the Town does not want to foreclosure on the property as they are concerned of the contamination and view the property as a liability.”

However, the fact that other people are avoiding this property does indicate there may be money to be made -if you’re a problem solver. When everyone else sees a property as a problem, that can be the ring of money to a problem solver.

In regards to the steps that I recommend, -getting a Title Report started would indeed be my first step, or close to it. The fact that a lawyer has offered some sporadic advice on a pro bono basis would not give me confidence about the condition of the title -unless title work has been the essence of the lawyer’s business. But don’t forget the second step I recommended. Check the Statute of Limitations for the mortgages. In MA, unpaid mortgages don’t last forever. You need to know when the statute of limitations runs out, because your Statute of Limitations can make the 1st mortgage unenforceable, and therefore nearly worthless.  (You can still attempt to foreclose a mortgage that is past the statute of limitations, but if the party being foreclosed appears and claims the statute of limitations, then the court will dismiss the foreclosure and you get nothing.)

If I wanted this property, among the steps I would definitely take would be simultaneous negotiations with the mortgage holders and the widow to acquire their interests. But please bear in mind that from your posts, I can not tell whether the property is worth anything, worth the cost of an environmental study or worth $100 million. You haven’t told us how much the property is worth.

And if you did acquire the interest of one or more of the parties, then my advice to you was not necessarily to foreclose but rather, “If you get either the mortgage note, or widow's deed, then ask your title company how they want you to proceed in order for you to get an insurable title.”   Although, in view of the fact that your title companies have been hesitant to work with a non-lawyer, I would rephrase that sentence to, “If you get either the mortgage note, or widow's deed, then tell your title company you will want to buy title insurance. Then let them tell you what is necessary in order for you to get an insurable title.”

Ray, you’ve commented, “I am very surprised I could randomly do a study on the site. Would the environmental company ask me for documentation with right to access?Lets be clear. My advice is to just go ahead and do it, but that is not because you have a right to do an environmental study on someone else’s property, it is only because your posts indicate that no one is likely to complain if you do. You’ve stated, “She (the widow of the owner) has no intent to do anything with the property.” That tells me she is unlikely to complain if you access the property.  However, you have much more information than what you’ve posted here. So if you think she will sue you for doing an environmental study, then don’t do it!  Or at least do the environmental study while inspecting the property as an agent for the bank -so you at least have some cover.  All you have to do is remind the bank that they have a right to protect and preserve the property, and would the bank mind if you looked at the property on their behalf to see what is needed to protect it.  Then you have at least verbal permission to access it.  Conduct your environmental study while looking over the property to see what it will take to preserve it.

In my 1st post I did say that, “If, it is abandoned, then not only you, but anyone has the right to access the property.” That statement was based, on your original post that the property was “abandoned and unpaid".   However, you’ve since indicated that the property is more correctly vacant and unpaid, which is different from abandoned. The widow is still making decisions regarding the property so she has not given up all her interest in it, as would be required if the property were abandoned.

You also asked, “Would the environmental company ask me for documentation with right to access?”. In my experience, that is highly unlikely, but it is possible. If they did ask for documentation of your authority to on the property, it could be a problem and you would have to solve that problem. For a property of this type, you’ve got to be a problem solver. You’ve got to enjoy solving problems that other people avoid. There is always a way. Find it. There is in fact always another way, and there is always a better way. Constant effort, constant improvement will get you where you want to be.  Though it is not likely to be a problem, if this arises and you can not figure out problems like this, then these types of properties are not for you.

Ray you asked, “Regarding the Municipal lien, is it true that I could negotiate a deferred payment plan with them and/or only pay principal (Meaning they can elect to forgive interest)?

Generally, lien holders can make any arrangement they want for payment plans and lien holders can reduce or eliminate principal or interest. However, let’s assume (because you haven’t clearly stated it) that this Municipal lien is for property taxes. If it is, then the power to levy property taxes is tightly controlled by state law and what a Municipality can forgive or arrange may also be controlled by MA statute. I do not know MA law in this regard. But you could get a good idea by calling the Municipality and asking people there if they have ever heard of the municipality reducing the amount due or making payment arrangements.

The answer to your last question, “(I)f I acquired the promissory note, which I believe is last in line, would I still be able to foreclose with this?”    Yes, you could foreclose the last lien and the property would go to auction. The first to be paid out of any proceeds would be the municipalities who must be paid the full amount they are owed together with interest and penalties. If the property sold for more than the Municipal liens, the next to be paid would be the banks.  If the municipal liens are paid off, then the first mortgage holder would probably  get the property unless the amount of the bid was sufficient to pay the full amount of principle, interest and costs they are owed.  Then the second mortgage holder would be paid full, or would end up with the property.  You’d cause the property to be auctioned, and get it out of the hands of the heirs but you’d have almost no chance of ending up with the property.

In summation, from what you've posted, it sounds like the bank should be giving away its interest for next to nothing.  Be sure to tell them, the owner's widow want's nothing to do with this property, and is afraid of what an environmental study will turn up, and that the city won't foreclose because they are afraid of the contamination liability they'd inherit.  Then, I'd say that for those reasons and the fact that the bank's note is fast approaching the statute of limitations, you can no longer offer what you previously would have.  If they want a token payment, you'll take it off their hands.  Otherwise, they can have the property and the contamination liability that comes with it.

Thank you very much for your time and extreme detail and feedback. I am sincerely grateful.

  1. 1.  Title Insurance - I have reached out to a couple title companies and will get the ball rolling on this.

  2. 2.  Stature of Limitations - I have studied the mortgage which I believe is first in line after the municipal liens. The mortgage is dated 1998 which states it was expected to be paid back in 5 years. This does appear that it could be past the stature of limitations. (thank you for this insight). This being said, I will need to do more to determine which mortgage(s) are still active and/or first in line. Overall, there are 2 tax liens, 2 mortgages, and a Promissory Note.

  3. 3.  Property Value – The assessed value of the property is approx. $450K, however the real value is that the Town is generally open to almost any scenario to replace it if feasible. Whether it be a strip of condos or 30-40 unit apartment building. I have made proposals to all key department heads and they are willing to help should I be able to pull something together. With all liens, the debt is very high approx. $700K. And environmental expert of 30 years told me to expect clean up to be $250-300K before having the study.

Thank you painting a clearer picture for me. It seems I need to know the best path to a clear title. Obtain a mortgage Note which will put me in a safe place to do the environmental study and foreclosure. In the meantime, I will continue to try to work something out with the Widow. I also will be talking with Mass Development about different financing options and grants today actually.

As you can likely already tell, this would be my first project this scale which I know is probably “Medium” size.

@Davido Davido :

Thank you very much for your time and extreme detail and feedback. I am sincerely grateful.

  1. 1. Title Insurance - I have reached out to a couple title companies and will get the ball rolling on this.

  2. 2. Stature of Limitations - I have studied the mortgage which I believe is first in line after the municipal liens. The mortgage is dated 1998 which states it was expected to be paid back in 5 years. This does appear that it could be past the stature of limitations. (thank you for this insight). This being said, I will need to do more to determine which mortgage(s) are still active and/or first in line. Overall, there are 2 tax liens, 2 mortgages, and a Promissory Note.

  3. 3. Property Value – The assessed value of the property is approx. $450K, however the real value is that the Town is generally open to almost any scenario to replace it if feasible. Whether it be a strip of condos or 30-40 unit apartment building. I have made proposals to all key department heads and they are willing to help should I be able to pull something together. With all liens, the debt is very high approx. $700K. And environmental expert of 30 years told me to expect clean up to be $250-300K before having the study.

Thank you painting a clearer picture for me. It seems I need to know the best path to a clear title. Obtain a mortgage Note which will put me in a safe place to do the environmental study and foreclosure. In the meantime, I will continue to try to work something out with the Widow. I also will be talking with Mass Development about different financing options and grants today actually.

As you can likely already tell, this would be my first project this scale which I know is probably “Medium” size.

@Ray Hayward ,  Remember that the 1st mortgage can be of value to you even if it is past the Statute of Limitations.  The statute of limitations is only a defense, it must be claimed by the person who is being foreclosed.  If you can show the bank their note is basically worthless (past the statute of limitations), then you should be able to buy it for next to nothing.  Do get a statement of payments made with dates they were made.  However, since in this case it is unlikely that the widow or other heirs would appear to contest a foreclosure so you could still use it to foreclose and you'll be entitled to the full amount due under the note as your bid.  That would almost insure you'd get the property for the amount you paid to buy the bank's interest (next to nothing).  Make sure you buy the note (the right to foreclose).  You do not want to buy a mere release of their mortgage lien. 

If no one appears in court to defend the foreclosure then the statute of limitations won't be applied and the foreclosure would proceed as normal.   

It may be worth your while to obtain the 1st mortgage and foreclose just on the hope that someone else will buy the property for more than is owed on the 1st.   If you pay $100 or even $5000 for the 1st mortgage, and at the foreclosure auction someone bids $100,001, then you've just made a phenomenal return.   Your expenses are only the cost of the Mortgage and the foreclosure (less than $10,000), to gain a $100,000 in the 6 months or so it takes to complete the foreclosure.   You'd want to check whether the municipal tax liens would need to be paid from the proceeds of the foreclosure or whether they remain with the property for the new owner to deal with.  

Best wishes that you can profit from a foreclosure or proceed to develop the property. 

Hi @Davido Davido :

Yes, I will wait until talking to Title Company over the next couple of days, but do believe the Municipal Tax Liens are automatically first in line. There is one Tax Lien which is approx. $100K, the 2nd one is approx. $25K.

Regarding the Mortgage Notes, I am finding that there was two mortgage notes as to which the original first note was discharged and concerted to a Promissory Note.

The are 3 liens on the property (excusing tax Liens), here is the scenario:

1. Bank #1 Mortgage from 1998

2. Bank #2 Mortgage from 2003

3. In 2007, Mortgage #1 was discharged but then the property was listed in a Promissory Note the same day of discharge (Mortgage converted to Promissory Note)

With the discharge of the Bank #1 Mortgage from 1998 and discharged and converted into a Promissory Note in 2007, does this make the Bank #2 Mortgage from 2003 “First in Line”?

 

@Ray Hayward ,  You asked, 
"With the discharge of the Bank #1 Mortgage from 1998 and discharged and converted into a Promissory Note in 2007, does this make the Bank #2 Mortgage from 2003 “First in Line”?"

Get a title report and you'll know for sure.  But yes, almost certainly the 2003 mortgage is now first in line -after the Municipal Tax Liens.  Typically the first in line is based entirely on filing date.  The 1998 mortgage was discharged so its effectively gone.  That made bank mortgage from 2003 first in line -after the municipal Property Tax Liens, and the new Promissary Note debt filed in 2007 2nd in line -after the Municiple Property Tax liens.

THanks again @Davido Davido :

I am working through some of these points thank you very much for your intel.  For the Note I believe is First in Time, I have found a Modification on the Registry of Deeds site.  Does a modification change anything in regards to first in time? (I am thinking it does not, but do not want to assume anything)

I'm also thinking that the modification does not change which mortgage is "first in time".  But in truth those questions are best addressed to professional familiar with MA laws.

Hi David, I was able to do a Title Search (for some reason in my state MA a Law is required to do this exercise). In result, my research was correct. However, the Bank first in time no longer wants to sell the Note. This being said, there are still 2 subsequent Liens on the property and have a couple questions:

First, as a reminder, the property has 2 Municipal Tax Liens (For 2 Parcels of land), Bank Lien #1, Bank Lien #2, and a Promissory Note to a CPA company.

(1) Would purchasing the Promissory Note be enough for me to do an environmental study to protect my asset? (I understand that I would never recover the money, and would be purchasing solely to be able to do the environmental study)

(2) If I did the study, then convinced the Town to foreclosure so that I can attempt to win the property at Auction, would I be able to circumvent the Bank Lien #1? Or what challenges would I face at this point in time?

Again, many Thanks in advance!

Originally posted by @Davido Davido :

Hello@Ray Hayward

About title companies not wanting to work with you, -you asked; “Does this seem strange to you? Do you know of any companies that would work with me on this?”

Yes it seems too strange. Is it possible you misunderstood what they were saying? Title companies do not provide legal advice and you may have been asking them legal questions. However, title companies do provide title insurance. Did you ask them the cost to get title insurance on the property(s)? I have no doubt that both Title Companies would provide title insurance on this property if that is what you ask them to do because that is the business they do.

No I do not have a title company to recommend for you to work with in MA, because I’m on the opposite end of the county. Many Title company’s are national, and I’ve used nationwide title companies like First American, Chicago, and Stewart in the past, but lately I use only our local company, -Thurston Title, which won’t be of any help to you.

You mentioned speaking to the Widow and offering her cash to renew a previous agreement for “Due Diligence”. She declined and now your wondering whether “she is concerned of liability based on findings?”. Yeah. I’d be wondering the same thing, especially since, “the Town economic developer … says that the Town does not want to foreclosure on the property as they are concerned of the contamination and view the property as a liability.”

However, the fact that other people are avoiding this property does indicate there may be money to be made -if you’re a problem solver. When everyone else sees a property as a problem, that can be the ring of money to a problem solver.

In regards to the steps that I recommend, -getting a Title Report started would indeed be my first step, or close to it. The fact that a lawyer has offered some sporadic advice on a pro bono basis would not give me confidence about the condition of the title -unless title work has been the essence of the lawyer’s business. But don’t forget the second step I recommended. Check the Statute of Limitations for the mortgages. In MA, unpaid mortgages don’t last forever. You need to know when the statute of limitations runs out, because your Statute of Limitations can make the 1st mortgage unenforceable, and therefore nearly worthless.  (You can still attempt to foreclose a mortgage that is past the statute of limitations, but if the party being foreclosed appears and claims the statute of limitations, then the court will dismiss the foreclosure and you get nothing.)

If I wanted this property, among the steps I would definitely take would be simultaneous negotiations with the mortgage holders and the widow to acquire their interests. But please bear in mind that from your posts, I can not tell whether the property is worth anything, worth the cost of an environmental study or worth $100 million. You haven’t told us how much the property is worth.

And if you did acquire the interest of one or more of the parties, then my advice to you was not necessarily to foreclose but rather, “If you get either the mortgage note, or widow's deed, then ask your title company how they want you to proceed in order for you to get an insurable title.”   Although, in view of the fact that your title companies have been hesitant to work with a non-lawyer, I would rephrase that sentence to, “If you get either the mortgage note, or widow's deed, then tell your title company you will want to buy title insurance. Then let them tell you what is necessary in order for you to get an insurable title.”

Ray, you’ve commented, “I am very surprised I could randomly do a study on the site. Would the environmental company ask me for documentation with right to access?Lets be clear. My advice is to just go ahead and do it, but that is not because you have a right to do an environmental study on someone else’s property, it is only because your posts indicate that no one is likely to complain if you do. You’ve stated, “She (the widow of the owner) has no intent to do anything with the property.” That tells me she is unlikely to complain if you access the property.  However, you have much more information than what you’ve posted here. So if you think she will sue you for doing an environmental study, then don’t do it!  Or at least do the environmental study while inspecting the property as an agent for the bank -so you at least have some cover.  All you have to do is remind the bank that they have a right to protect and preserve the property, and would the bank mind if you looked at the property on their behalf to see what is needed to protect it.  Then you have at least verbal permission to access it.  Conduct your environmental study while looking over the property to see what it will take to preserve it.

In my 1st post I did say that, “If, it is abandoned, then not only you, but anyone has the right to access the property.” That statement was based, on your original post that the property was “abandoned and unpaid".   However, you’ve since indicated that the property is more correctly vacant and unpaid, which is different from abandoned. The widow is still making decisions regarding the property so she has not given up all her interest in it, as would be required if the property were abandoned.

You also asked, “Would the environmental company ask me for documentation with right to access?”. In my experience, that is highly unlikely, but it is possible. If they did ask for documentation of your authority to on the property, it could be a problem and you would have to solve that problem. For a property of this type, you’ve got to be a problem solver. You’ve got to enjoy solving problems that other people avoid. There is always a way. Find it. There is in fact always another way, and there is always a better way. Constant effort, constant improvement will get you where you want to be.  Though it is not likely to be a problem, if this arises and you can not figure out problems like this, then these types of properties are not for you.

Ray you asked, “Regarding the Municipal lien, is it true that I could negotiate a deferred payment plan with them and/or only pay principal (Meaning they can elect to forgive interest)?

Generally, lien holders can make any arrangement they want for payment plans and lien holders can reduce or eliminate principal or interest. However, let’s assume (because you haven’t clearly stated it) that this Municipal lien is for property taxes. If it is, then the power to levy property taxes is tightly controlled by state law and what a Municipality can forgive or arrange may also be controlled by MA statute. I do not know MA law in this regard. But you could get a good idea by calling the Municipality and asking people there if they have ever heard of the municipality reducing the amount due or making payment arrangements.

The answer to your last question, “(I)f I acquired the promissory note, which I believe is last in line, would I still be able to foreclose with this?”    Yes, you could foreclose the last lien and the property would go to auction. The first to be paid out of any proceeds would be the municipalities who must be paid the full amount they are owed together with interest and penalties. If the property sold for more than the Municipal liens, the next to be paid would be the banks.  If the municipal liens are paid off, then the first mortgage holder would probably  get the property unless the amount of the bid was sufficient to pay the full amount of principle, interest and costs they are owed.  Then the second mortgage holder would be paid full, or would end up with the property.  You’d cause the property to be auctioned, and get it out of the hands of the heirs but you’d have almost no chance of ending up with the property.

In summation, from what you've posted, it sounds like the bank should be giving away its interest for next to nothing.  Be sure to tell them, the owner's widow want's nothing to do with this property, and is afraid of what an environmental study will turn up, and that the city won't foreclose because they are afraid of the contamination liability they'd inherit.  Then, I'd say that for those reasons and the fact that the bank's note is fast approaching the statute of limitations, you can no longer offer what you previously would have.  If they want a token payment, you'll take it off their hands.  Otherwise, they can have the property and the contamination liability that comes with it.

there are definitly states that require lawyers to order title reports from title companies.. IL being one.. At least when I tried to get a title report from Chicago they would not do it for me becasue if was not a lawyer.. maybe one of the nationwide ones can order and E and O type report

 

Hello Ray Hayward,

Pleasure to hear from you! The correct answer to your 1st question is that I do not know, -whether a lien holder can do an environmental study to protect their lien, but a lawyer familiar with your State laws should be able to tell you. However, since the owner of record has died and no probate has been done, it is difficult to picture anyone complaining about an environmental study being done on the property. Without a court appointed administrator or executor, who would have standing to sue you?

Perhaps consult an attorney, but I'd be inclined just do the environmental study without buying any one's lien. Then I'd use anything negative found in the study to convince lien holders that their liens are worth even less than they thought.

If the widow has no plans to do anything with the property, she may complain about you trespassing on 'her' family property, but what are the odds that she'd file a lawsuit?  Even if she were inclined to file, she has no standing to complain of trespass on a property that she doesn't own. Check that with your attorney. I doubt that you'd need any legal cover.   It may be cheap enough to buy a junior lien.  But, unless an attorney can give you a clear and well reasoned statement of some likely and adverse result from trespassing necessary to do an environmental study, I'd just do the study like I owned the place.

If one Environmental company won't do the study without your name on the title, find another.  If you can tell a decent story, you'll find an Environmental Co. that will do the study without verifying the details of ownership.

As to your second Question, "if I convinced the Town to foreclose, would I be able to circumvent the Bank Lien #1?" 

Verify when the 1st Mortgage (and each lien) is beyond the Statute of Limitations.  See https://www.nutter.com/trending-newsroom-publications-Statute-of-Limitations-for-Mortgages-Referencing-Maturity-Date-of-Underlying-Debt-04-17-2015 If the date the 1st mortgage becomes due in full is specified, or if the underlying note specifies a due date, then the mortgage is only enforceable for 5 years past the specified date.  You mentioned above that the 1st mortgage was only for 5 years and could be already unenforceable.   Verify that with a RE Attorney. If no date is specified, in either the mortgage or the underlying note, then Mass Law presumes that the mortgage runs for 30 years from the date it was initiated. It is then enforceable for 5 years after the mortgage end date (35 years from the start date).

However, also be sure that you understand the effect of the Town foreclosing its tax lien. In my state, WA, when our county forecloses its tax lien, the buyer at the tax foreclosure auction gets a deed to the property free and clear of all previous liens. The prior mortgage and/or liens are wiped off the title. If a lien holder wants to protect their interest, then the lien holder must pay the property tax. Brother, I'm unfamiliar with Mass. laws and tax foreclosure, so that is also something to check with a local RE attorney.

Good luck

@Ray Hayward ,  in most cases the municipal property tax liens on real property are also subject to statutes of limitations.   They don't last forever.  Since the property tax liens exceed $100,000 it would be worth the cost of a good Mass. attorney to know if/when the property tax lien expires.