Foreclosure
How does the foreclosure of a 2nd mortgage effect the first. Both are though different banks. Could the 2nd bank make the first sell the house? or would there be a lien put on the first which would be paid if the house ever sold. (This is in Texas)
Thanks for any input..
You know I have been wondering about foreclosures too, hopefully someone will give a good answer, im sure they are the same in most states as I am in Florida
My understanding is that if it goes to auction, then the people at the auction are bidding on the house, but the winner, gets a house that has a first a first mortgage on it. The second lien holder might even be at the auction to bid up to their payoff amount. And prior to the auction, the second might buy the note from the first lien holder.
Brenda
What Brenda said is in agreement with my experience and research on foreclosures. There are a few issues that I might add.
First, it has been my experience (which is old) that the first may be assumed by the person who wins the auction. This may be more a courtesy than a right. I found an instance where a first demanded payoff because of a due on sale clause, and apparently won in court.
Second, if the bid for the property exceeds the amount owed on the second, what happens to the overage? This seems to vary from state to state. Sometimes this goes to the homeowner and sometimes other liens are payed off or paid down.
Larry Loftis wrote a book (published earlier this year) titled "Profit by Investing in Real Estate Tax Liens". I own the book and highly recommend it, as the info on it is current. He discusses both tax liens and tax deeds.