Have Not Seen This Before - 2nd Position Note

[Chris Seveney]

Here is one where I have reviewed this with 4 attorneys and none of them have seen this. A HELOC on a property whereby the seller sold the property and the lender agreed to a short sale. For simple terms lets say the 2nd lien was $50,000 and the short sale netted the lender $5,000 which had a deficiency balance of $45,000. The borrower signed a deficiency agreement acknowledging the debt and the release of mortgage that was recorded was clear the mortgage is released but the debt is not satisfied.

Seems like this was common 5-10 years ago. Here is the kicker, the original lender attempted to collect the outstanding debt, eventually charged it off their books (which does not wipe the lien its an internal accounting measure) and sold the note down stream. 

Still, this is extremely common. Here is the kicker: in the DD file, there is also a new note signed by the borrower for the deficiency amount but the lender appears to be a 3rd party private mortgage insurance company. Add to it there was never a satisfaction for the note - so in reviewing the file there appears to be 2 notes for the same amount owed, and the borrower clearly does not owe double.

So whose note is valid? the original lender or the subsequent note?

[Andy Mirza]

@Adam Walter Banks do stupid things all the time, no surprise, haha!

At the end of the day, people make the best decisions when it's their actual money at stake, not someone else's.