Junior Mortgage Liens

[Stevenhill]

When a First mortgage holder gets granted a "Relief from stay" how does that effect the 2nd or 3rd Mortgage? Is the property released from the BK or just the First mortgage holder? If the first gets a "Relief from Stay" can the 2nd foreclose? How does this effect the 2nd mortgage and any equity loans?

It must be the entire property that gets released because often I will see a small 1st Mortgage and followed by a much larger 2nd by the same bank. The bank will only mention 1st in their Relief request.

Any info on this process will help me.

[StartingOver08]

In the foreclosure process usually the first mtg is the one that is 'foreclosing' out the lien rights of the jr lienholders. So, in this case the 2nd and 3rd would get wiped out by the foreclosure of the first mtg. It may be the same bank/lender servicing the loan, but usually the actual mortgage note is held by an investor and in the case of more than one mtg, usually in today's world, more than one investor.

When the Relief from Stay is granted - it allows the first mtg to foreclose.

[chad9162]

I think you need to understand how real estate and foreclosure works. If the 1st gets a relief of stay it means they can take action against you and foreclose. The 2nd and 3rd are still lien holders so they still get they're money if there's equity. The 2nd and 3rd do not need a relief of stay because they aren't taking an action against you. If they wanted to foreclose then they'd need a relief of stay but also have to pay off ALL the other lien holders that are ahead of them.

If the 1st forecloses it wipes out the other lien holders if there's no equity to cover their debt so foreclosing is always best for the 1st. Now if the sale of the house covers the 1st and part of the 2nd then the 2nd would get money. I hope this clarified relief of stay.

[StartingOver08]

Thank you chad for clarifying my post- I work with so many underwater properties - I came from the assumption that there was no equity! My mistake.

[chad9162]

Thank you chad for clarifying my post- I work with so many underwater properties - I came from the assumption that there was no equity! My mistake.

Actually I never intended to clarify your post. I think we post at the same time and my post just ended up underneath yours. I thought your response was pretty much the same as mine.

[Stevenhill]

I never said I was in Bankruptcy. Let me try this again.


Chapter7 - Owner is "Surrendering" property
FMV $100,000
Ist Mortgage $40,000
2nd Mortgage $60,000

If the 1st obtains a "Relief from Stay" can the 2nd Foreclose or do they have to file their own "Motion for Relief"?

What happens if the case has been closed? Is it to late for the 2nd to Foreclose?

Thanks

[StartingOver08]

If you are the holder of the 2nd mortgage:

You can attend the foreclosure sale and bid against the bank holding the first. If you are the winning bidder, you pay the 1st lender and end up with the deed. In that event the 1st ends up with the proceeds and you end up with the collateral. If the 1st is still in the middle of foreclosure, you probably can make an offer to the bank to 'buy out' the first before the foreclosure is finished. You need an attorney for this. This would work only if you are the 2nd lienholder.

If you do not hold the 2nd mortgage, then when the 1st forecloses, the 2nd is wiped out. You could still buy the property from the bank, just like a regular REO sale.

If the debtor has been discharged and closed from a Ch 7 BK, they are out of the picture: no debt owed and you can not come after the debtor for any deficiency.

What I do not understand about your post is the reference to Relief from Stay. If the case is currently closed, then the automatic stay has been terminated and the debtor has a discharge. See discharge info here: http://www.uscourts.gov/bankruptcyco...harge.html#how

I don't know if it is too late for the 2nd to start any sort of foreclosure action now. Maybe one of the others do...

PS I am sorry that I misunderstood your original post.