Foreclosure Confusion
Hello,
Here is the story, I went to the court house today to bid on a house, the 2nd mtg was being auctioned offi )26,000 is the current bid, but the first mtg is still in effect for 59,500, and the neighbour was there and she said that the owner of the property might or already have filed for bankrupcy, I don't know if she is serious or screwing with me (by the way she is the current highest bidder on the second mtg 26,000, she said she is going to rent it back to him, but who knows who is telling the truth.... my question isd how to deal with this situation to get th ebest outcome if possible, do I call the 1st mtg and try to negotiate with them for a lower than 59500 or that s not negotiable, and how do i really know if he really didi file for bankrupcy becuase I think if you do file they cannot take your primary house from you and I would be wasting my time and freezing my money on a dead end, I really like the house and its nice, any help is greatly appreciated 
I'd try dealing with the loss mitigation dept of the 1st mtg holder.
FYI, even if the owner does file BK it will only stall the foreclosure for a few weeks, and never does it kill it dead...but it might motivate the mtg holders to discount their mtgs.
If it were me, I'd try to BUY the 1st mtg, not just pay it off. Some lenders will sell and assign the mtg to you, others won't, for whatever reasons. If you owned it, and proceeded to foreclose it, the 2d nopte holder would have to pay you 100% or lose her security position.
You didn't say what the house is worth nor did you state the value of the second. I assume that the second is worth more that 26K from the bidding. Under these circumstances you are unlikely to get the holder of the first to sell at a discount since it looks like the first has substantial value behind it. Was the first in default?
You will most likely need the owner's approval before the loss mitigation department will talk to you. At that time you can ask the owner about their plans.
I worked cooperatively with an owner and their bankruptcy attorney and wound up with a nice house.
Give us the missing details.
Regards,
Ed
What state do you live in?. I'm confused. It seems like the second is being auctioned off over an extended period of time. Hours? Days? Weeks??
If this guy filed Bankruptcy the sale would not be taking place. Once the foreclosure sale is concluded the BK will have no effect on this property.
The winning bidder on the second takes title subject to the senior lien.
Contact the owner. Find out what (if any ) arrangement he has with the neighbor.
Try to get authorization to talk to the 1st mortgage holder.Do it quickly because the owner has been foreclosed and no longer has any ownership in the property. I don't know what state you're from so I don't know if there's any right of redemption. Any way, I'd get the information from the 1st mtg lender because they may soon be foreclosing unless the new owner brings that loan current. I wouldn't buy the 1st because as long as the new owner keeps the payment on the 1st current- you become the bank for the remaining term of the loan. I'd buy it at the 1st mtg foreclosure if there was substantial equity.
Sammy is right on. An dats da trutthh.
Really important to know what state you are in. What you described could not happin in California. Well not since 1870's we dun changed the laws a little.
Looking thru my State Books, I cannot readily identify a sale of a second Mortgage wherein the original bid is short of the full amount. Unless the Lender directed the sale agent to announce the reduced starting bid.
Please come back on line and clear this all up. I am puzzled and when puzzled I cannot become creative and I am trying to design a really great interior in my ever non ending search for the perfect shiping container to house plan......
Pins and Needles. Lucius
I was also thrown off by the protracted auction period on the second. If the first was in default it may be that the second note holder brought the first current before filing if it was in default. That is why I asked the question. You also should be aware that if the first is delinquent the amount owed on it may be significantly larger than $59,500. Lenders have the habit of tacking on additional fees and penalties when their notes are in default. This backs up sammyvegas' advice on contacting the holder of the first.
Again, let us know some more.
Thanks to all for the suggestions and advice so far, let me try to add the missing info thatr you asked for.
the state is North carolina.
the house is worth between 128-150 in comparison to sales in the www.neighbourhood.the second mtg is worth 49 K I guess the curerent bid is at 50% and I don't see it going above 30.
I get 10 days after each bid to upset it my dead line is nov, 22nd, I hope this info is helpful.
thanks
[ Edited by DaveT on Date 11/13/2003 ]
jamee199,
I am not sure of what you mean in your last sentence. Are you saying that you have 10 days to up the current bid on the second? Does this end if no one ups the bid within a 10 day period? Has a date been set when the property will go to sale?
I wonder if anyone else has heard of such a long auction on a second. This one is new to me!
-Ed
yes, I have 10 day to upst the last bid by at least 5 %,
but I just found out an importnat info, the holder of the first mtg is not a bank its a person "owner fiancingf I guess" which worries me now, say I win the bid on the 2nd mtg, but he decides not to sell and I assume he is have the right to reedem the property to himself once the borrower default, ??? what do you creative investors think?
thanks
When you say "he decides not to sell" I assume you are referring to the holder of the first. I have asked you if the first is in default. If the first is in default and you are successful in buying the second, then you can bring the first current and foreclose yourself.
What you need to watch out for is that in some states the first note holder may be able to call the entire loan without possibility of redemption depending upon at what stage the foreclosure is. You need to check on what the story is in NC. There are a number of active TCI members who might also know and respond.
In California, you can bring a loan current up to the time of the foreclosure sale.
Another possible outcome is that the homeowner brings everything current and you are holding a discounted note. This may be good depending upon the terms of the second note. What are the terms of the second?
edmeyer
I don't know exactly to term of the 2nd but I willl check and let you know.
jameel99,
One more fundamental point of clarification. Your original message stated that the second mtg was being auctioned off. Is this the case or is the second mtg holder auctioning off the house (foreclosure)? My assumption was the former since as bankruptcy would have stopped the sale. Which is it? Again, is the first in default?
the house is being foreclosed on by the the 2nd mtg, and yes that was part of my question about the bankrupcy stopping thesale but was told it would do for few weeks on this site eventhough my former belief is they cannot take your primary residence if you do file for bankrupcy even if they foreclose on the house
They can definitely take your primary residence in foreclosure. It may take more than a few weeks for the banckruptcy judge to allow the sale. If you own the second, then you might need an attorney to get the judge reinstate the sale. The deal sounds good enough if you can afford to have your cash tied up until a sale.
I will ask you again, is the 1st in default?
In many respects, NC legal procedures and processes parallel those in SC. I have run into quite a few lawyers in my area in SC who are also licensed to practice in NC.
In SC, some properties up for foreclosure sale at the courthouse enter a 30-day deficiency period following the foreclosure sale. The winning bidder at the foreclosure sale just has to deposit 5% of his winning bid, then has 30 days to bring the balance of his bid to the courthouse to complete the sale.
Whatever happens at the foreclosure sale, could be upset by a higher bid at the deficiency sale, also called an upset sale. The minimum upset bid at the deficiency (upset) sale is just $1 over the original sale price.
If the property is not purchased at the upset sale, then the original foreclosure auction winner must bring the balance of his bid to the courthouse to complete the purchase.
If there is a deficiency period requested, there will only be one. The results of the upset sale are final.
Hi ,DaveT
I have a few questions about SC foreclosure procedures for which you may have answers.
If there is no deficiency to the foreclosing party does this automatically eliminate a deficiency sale? In other words, if Jameel99 were to pay the face + what is owed on the second would that stop the deficiency sale? The name deficiency sale suggests this is so.
What is the latest point in the process where a bankruptcy can stop a sale?
Finally, what is the latest point in the process where the note may be brought current without acceleration?
Our procedures here in CA are somewhat different. Just curious.
Regards,
Ed
edmeyer,
I am not an attorney, nor am I a foreclosure expert. I am just offering my observations gleaned from the courthouse sales I have attended. In that context, here is my best answer to each of your questions.
If there is no deficiency to the foreclosing party does this automatically eliminate a deficiency sale? A deficiency period is requested in the foreclosure petition. The parties may waive the deficiency period, in which case the foreclosure sale is final. If the deficiency period is not waived, then there is an upset bid sale 30 days after the foreclosure sale.What is the latest point in the process where a bankruptcy can stop a sale?As long as the proper documents are filed with the court prior to the sale, the property can be withdrawn from the sale before it is offered. Our foreclosure sales are scheduled to begin at 11:00 am. I have seen property withdrawn from the sale just before it was to be offered for bid, though the judge never explains why the property is withdrawn.Finally, what is the latest point in the process where the note may be brought current without acceleration?This is a question better addressed to the foreclosing lender. I suppose there are lenders that will approve a workout agreement at the 11th hour, and tell their attorney to withdraw the property from the foreclosure auction.[ Edited by DaveT on Date 11/14/2003 ]
Thanks, Dave
Ours is a bit different. We don't have the deficiency sale so this was a concept that was new. I believe this is somewhat recent law but the loan can be brought current without acceleration up until the sale. I think the old law had redemption up to the time the notice of sale was recorded.
Regards,
Ed
edmeyer.
I don't know about the 1st yety, I got the name and I will be calling tomorrow.