2nd Lienholders Can Foreclose?
Can a second or third lienholder initiate a foreclosure? If so, don't they still have to wait in line behind the 1st lienholder or is the property auctioned with the 1st still in place? Any place I can find out more about foreclosure law in Florida?
Yes, The 2nd or ever 3rd and foreclose on a property. I don't know if you intend to purchase the properties at auction but if you do you need to make sure what lein position you are bidding on. Just last week here in Az, a newcomer purchased a condo. The opening bid was 45k, worth about 100k, but the bank foreclosing was the 2nd, there was still a 1st mortgage of 66k due. so basically he paid $111,000.00 for a condo only worth about $100,000.00. I am not sure on the law's in florida, but If you want to purchase foreclosures at auction just head down to your local courthouse and attend the sales.
Yes, in Florida a 2nd (or subsequent mortgage or lien) can be foreclosed just like a 1st; however, the lawsuit does not foreclose (wipe out) any mortgages, liens, or judgments which were recorded ahead of it. They (it) would remain intact. So a prospective purchaser at a foreclosure auction or a lien/judgment holder needing to foreclose on a property would be responsible for whatever
encumbrance(s) preceed(s) (date of recordation) the one foreclosing. As you probably already know, any mortgage, lien, judgment, etc. which is being attached to a certain real property should be recorded as early as possible because the date of the recordation is the benchmark as far as which is in first (2nd, 3rd,etc.) position. In the event of default of that debt or mortgage, a creditor (or mortgagee) who got to the court house to record his instrument first, remains intact because his is recorded prior to the one foreclosing.
A seasoned researcher can usually spot a 1st mtg. just by its credentials. Names of companies tell a lot, such as GE Capital, Wells Fargo, Countryside, Aurora, Midland Mtg., Washington Mutual, etc. usually indicate that it is a first mtg. falling under the guidelines of Fannie Mae because as far as I know, these companies only service first mortgages. To be certain however, it's best to visit the courthouse and read each document before investing in the purchase of it at foreclosure or otherwise.
Magi,You can foreclose on a 2nd and 3rd mortgage,but the 1st will not be affected. Usually if the 2nd mortgage forecloses the 1st is soon to follow. You can sometimes negotiate with the 1st mortgage holder to buy the mortgage at a discount if you have foreclosed on the 2nd. Lenderd prefer to sell non-performing assets before they go on the books.
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On 2004-02-15 08:34, MichaelChandler wrote:
Magi,You can foreclose on a 2nd and 3rd mortgage,but the 1st will not be affected. Usually if the 2nd mortgage forecloses the 1st is soon to follow. You can sometimes negotiate with the 1st mortgage holder to buy the mortgage at a discount if you have foreclosed on the 2nd. Lenderd prefer to sell non-performing assets before they go on the books. <IMG SRC="images/forum/smilies/icon_cool.gif">
So in Wingnut's example above all may not be lost. That guy may be able to work out a short sale with the 1st mortgage holder?
Still, it seems strange that someone with a 2nd or 3rd lien for a few thousand bucks can cause so much chaos. Now the 1st lien holder will probably take a loss. I would think the 1st lienholder should be willing to consolidate inferior lies just to prevent this from happening. Doesn't seem fair to the 1st lienholder.
The second and third can foreclose on a house if there is enough equity to put it up for sale to cover the first ,second , and third. The first mortgage will always get paid first though.
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On 2004-02-16 14:25, yipes wrote:
The second and third can foreclose on a house if there is enough equity to put it up for sale to cover the first ,second , and third. The first mortgage will always get paid first though.
What if there isn't? Then they can't foreclose?
I read on USENET a story about a guy who bid on the courthouse steps, thought he got a great deal then found out he was bidding on the 2nd mortgage and still had to pay the 1st. Can this happen or was the poster full of it?
I don't agree with yipes, The bank could care less if there is enough equity to pay off the first or second. If a home owner defaults on there 2nd mortgage they will still foreclose. I have attended sales in my area for several years now, and I have seen numerous people purchase 2nd mortgages ( when they think it is the first foreclosing) and they will end up loosing thousands if they complete the deal. In my area when you purchase a foreclosure at auction you need $1000.00 down and need to pay off the balance by the next business day, so If you purchase the 2nd or 3rd mortgage, you need to be able to verify how much the "senior leins" are against the property.
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On 2004-02-15 10:59, iammagi wrote:
So in Wingnut's example above all may not be lost. That guy may be able to work out a short sale with the 1st mortgage holder?
Still, it seems strange that someone with a 2nd or 3rd lien for a few thousand bucks can cause so much chaos. Now the 1st lien holder will probably take a loss. I would think the 1st lienholder should be willing to consolidate inferior lies just to prevent this from happening. Doesn't seem fair to the 1st lienholder.
Slow down a minute.
The holder of the 1st is not being pushed to take a loss. Once the 2nd is foreclosed on the winning bidder or the entity that started the foreclosure is now the one that is responsible for the 1st. They have to make up the payments to keep the 1st current or they get wiped out. In some cases the buyer of the second is a better credit risk than the person who lost the property so the 1st holder is in a stronger position.
I think you will find that short sales work best with the lenders who are the most at risk. That would be the lender in 2nd or 3rd position if the 1st is foreclosing. Being in 1st with the 2nd being the note under foreclosure has not materially put the 1st at risk.
John
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On 2004-02-20 05:28, active_re_investor wrote:
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On 2004-02-15 10:59, iammagi wrote:
So in Wingnut's example above all may not be lost. That guy may be able to work out a short sale with the 1st mortgage holder?
Still, it seems strange that someone with a 2nd or 3rd lien for a few thousand bucks can cause so much chaos. Now the 1st lien holder will probably take a loss. I would think the 1st lienholder should be willing to consolidate inferior lies just to prevent this from happening. Doesn't seem fair to the 1st lienholder.
Slow down a minute.
The holder of the 1st is not being pushed to take a loss. Once the 2nd is foreclosed on the winning bidder or the entity that started the foreclosure is now the one that is responsible for the 1st. They have to make up the payments to keep the 1st current or they get wiped out. In some cases the buyer of the second is a better credit risk than the person who lost the property so the 1st holder is in a stronger position.
I think you will find that short sales work best with the lenders who are the most at risk. That would be the lender in 2nd or 3rd position if the 1st is foreclosing. Being in 1st with the 2nd being the note under foreclosure has not materially put the 1st at risk.
John
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So if the 2nd lienholder initiates the forclosure they are going to have to pay off the 1st? Under what circumstances could this benefit the 2nd mortgage holder?