Defaulted mortgage notes

4 Replies

If a defaulted note is being auctioned, and has a 2nd lien, is the opening bid the amount the amount that the first lien holder agrees to accept? 

Suppose the note is $55K and opening bid is $40K. Does First Lien get the $40K or do they get everything up to $55K? Can 2nd Lien holder have claim on anything above $40K or above $55K?

Depends on the value of the property....Usually opening bid is to just get the bidding started.  The seller can claim everything up to their judgement amount...

We often start bidding below what's owed with instructions to our attorney to increase it up to a specific amount.  If there is a second, they would get what was left if the bidding continued above our judgement amount.

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Thanks... someone gave me some bad information and it really didn't make sense to me so thanks for clearing that up. He tried to tell me that the opening bid was the amount the first lien holder had agreed to accept as full payment. Which didn't make sense if the bids on the property were going to go higher.