Foreclosing From The Back Seat

Comments(3)

• 
  pmatheson118th February, 2004

  In CA the 2nd holder has several reasons to initiate forclosure.
  1. Not being paid.
  2. Sr. lein not being paid.
  3. Taxes unpaid.
  4. Fire Ins unpaid.
  5. Wastage of the security (Usually hard to prove in an appreciating market)

• 
  active_re_investor20th February, 2004

  There are many reasons the second mortgage holder can foreclose. A few of the best have been noted.
  
  The owner loses the house. The second holder ends up with the property and the 1st mortgage. Payments to keep the 1st current need to be paid after the 2nd forecloses of the holder of the 1st will act.
  
  I can not tell what your position in this transaction is. The present owner (the person who took out the 1st and 2nd) certainly has something to worry about if the 2nd mortgage holder forecloses.
  
  Can you clarify the question? If I fail to notice any clarification, send me a private note to prompt me.
  
  John

• 
  the_acrobat20th February, 2004

  John,
  
  Thanks for the reply.
  
  Here's the background.
  
  I received a response from a targeted marketing letter I sent out. The respondee is a women in the situation I described: foreclosure immiment on the 2nd mtg but the 1st is up to date.
  
  So I was interested to know more about the leverage and liability the 2nd mtg has in attempting a foreclosure, in order to get a clearer picture of what my own strategy would be if I chose to try and buy this property from the woman who owns it.
  
  Dollars are as follows:
  
  1st - $31K - up to date
  2nd - $22K - foreclosing
  I don't know what the specific house is worth yet but I do know its address and the averages for that area so figure it's in the $70K to $90K range fixed up.
  
  So if I understand you correctly, you are saying that the second mortgagee can foreclose the house, which would leave them with the house, which they would then have to sell, and the responsibility of continuing to pay the 1st mortgagee. That doesn't sound that attractive from the bank's perspective, to me. They are left wth the headache of having to unload the house once they own it, plus they get stuck with a debt obligation to the 1st mortgagee, right?
  
  If this is all true, I think there's a potential for a short sale with the second mtg holder especially if they forgive the outstanding balance and let the current owner of the house off the hook.
  
  Thus I could pay off the second using a short - something like 50 cents on the dollar - , then sub2 the first mtg, and give the current owner some moving money - maybe $10K - and still have plenty of margin for rehab costs and holding costs .
  
  Am I on the right track? Appreciate your advice.
  
  -presley
  
  Quote:
  On 2004-02-20 05:21, active_re_investor wrote:
  There are many reasons the second mortgage holder can foreclose. A few of the best have been noted.
  
  The owner loses the house. The second holder ends up with the property and the 1st mortgage. Payments to keep the 1st current need to be paid after the 2nd forecloses of the holder of the 1st will act.
  
  I can not tell what your position in this transaction is. The present owner (the person who took out the 1st and 2nd) certainly has something to worry about if the 2nd mortgage holder forecloses.
  
  Can you clarify the question? If I fail to notice any clarification, send me a private note to prompt me.
  
  John