Rights Of The Second Mortgage

If a property is foreclosed on by the first mortgage of $50,000 and there is a second mortgage of $200,000, what can the second mortgage do to recover their money? Are they basically out of the picture if they don't file a notice of default first? Is it wise for a seller to carry a large second mortgage if there is a small first?

Comments(2)

  • vanrijnr7th August, 2003

    To recover they will have to bid at the auction - they undoubtedly will.
    Still, if they end up owning the property they don't reall ywin, since they are not in the RE business but in the money / lending business. Their loan is no longer an asset but a liability, and they will have a problem if they gather too many properties. FDIC won't tolerate it.

    Is it smart to have a large second? Your challenge is that you've got more at stake while you can't control if the owner is sending his payments to the first lienholder.

  • Sash7th August, 2003

    What happens when the second mortgage forecloses? Is the first mortgage put in the same position?

    Mike

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