Foreclosure Sales And 2nd Lien
In a foreclosure where there is a 2nd mortgage, what happens when the property is sold at auction and the proceeds exceed the amount owed on the 1st mortgage? How does the referree know how much is owed to other creditors and how are the excess funds distributed? I own the 2nd mortgage on a property and am wondering if I should just bid at the sale myself or if I need to make a motion against the foreclosure to somehow protect my interest.
You need to bring the first current and then start a foreclosure action of your own on the amount that you had to pay to bring the first current plus any monies owed you on your 2nd.
"Bring the first current"? Boy, he will be doing the home owner a huge favor if he brings their loan current.
How much is the property worth? How much is the payoff of the first? How much is your payoff? Are there any other liens on the property? When is the sale?
Bredna
How much is the property worth? How much is the payoff of the first? How much is your payoff? Are there any other liens on the property? When is the sale? Are you sure that you are in second position?
Brenda
There is no favor to the owner by bringing the loan current other than removing the threat of the foreclosure which also threatens to wipe out the second. The owner will owe cmp31 the amount that was in default under the 1st.
It takes much less money (almost always) to bring the 1st loan current than to pay it off. If your note is smaller than the 1st anyone bidding at your (cmp31) foreclosure can get in for less money and will have the property subject to the first. If there are no successful bidders at your foreclosure, then you get the property subject to the first.
If you do bid at the auction, be sure your bid covers your loan. The distribution of overages at a foreclosure sale varies from state to state.
[ Edited by edmeyer on Date 06/06/2005 ]
"The owner will owe cmp31 the amount that was in default under the 1st. "
So if anybody (or just lien holders?) bring the foreclosing loan (or any delinquent loan?) current by paying the past due, then the home owner owes that person the amount of the paid past due?
No matter what - you still take a chance bringing the first current in hopes of recovering your money. Bankruptcy might be just around the corner.
Brenda
In order to protect themselves, junior noteholders can bring a senior note current and then file a Notice Of Default themselves. The amount to bring the note current is now a default on the junior. I am not sure if this covered by statutes or just in the note documentation. The junior note holders file a Notification of Notice of Default so they will be notified is there is a default on a senior loan.
Without the ability to remedy a default on a senior loan, who would make a junior loan? There may not be many who would lend $20,000 behind a $250,000 first if they had to bid $270,000 at an auction just to protect their $20,000 interest.
Brenda asked about curing defaults by ordinary citizens (not note holders). You will not automatically be entitled to anything if you just cure the default. If you find a situation where you would like to cure a default, but want what you pay to be owed to you by the owner, you can do this by creating a mortgage or trust deed behind the first with a note in the amount that you paid to cure the default. Now you are a noteholder!
Regards to all,
Ed