Stripping a 2nd Mortgage

[Mensa1]

Interesting on the way your foreclosure happened. Yes, it must be specific for Deed of Trust States. I still don't understand why any State would allow a Deed of Trust. I like the good old Mortgage! I like Judicial Foreclosure! I hate non-Judicial where there really is no defense.

Actually justbroke, the foreclosure that occurred here can happen just the same way in a judicial foreclosure state too. It is all in how the Plaintiff writes the complaint, and if they do not include the 1st mtg as a Defendant in the suite, then the foreclosure is "subject to" (not including) the 1st mtg. It is NOT customarily done that way in most places but it is and can be done that way almost anywhere... The jduge might look at it a little bit funny but there is nothing that states that ALL liens must be foreclosed, it is up the Plaintiff. You will see this done when there are large (comm'l) mtgs and the Jr position doesn't want to payoff the 1st, but take control of the property.

[brokenomore]

Now that the first owns this property, does that knock out the second entirely?

If by some miracle I could be in a position to buy the house when it comes on the market, could the second come back?

[albacore44]

Actually justbroke, the foreclosure that occurred here can happen just the same way in a judicial foreclosure state too. It is all in how the Plaintiff writes the complaint, and if they do not include the 1st mtg as a Defendant in the suite, then the foreclosure is "subject to" (not including) the 1st mtg. It is NOT customarily done that way in most places but it is and can be done that way almost anywhere... The jduge might look at it a little bit funny but there is nothing that states that ALL liens must be foreclosed, it is up the Plaintiff. You will see this done when there are large (comm'l) mtgs and the Jr position doesn't want to payoff the 1st, but take control of the property.

So are you saying there is a Loophole, so to speak, that allows a 2nd to foreclose, bid at auction, and not pay off the 1st, thus forcing the person out of the property ?? What if the person is current on the 1st ??

[Mensa1]

So are you saying there is a Loophole, so to speak, that allows a 2nd to foreclose, bid at auction, and not pay off the 1st, thus forcing the person out of the property ?? What if the person is current on the 1st ??

Not really a loophole, it is all in how the complaint (judicial states) or Trustee action is filed... If the 2nd doesn't name the 1st in the foreclosure then the 1st doesn't go away, simple as that. Sometimes novices attend these sales where the 2nd mtg is foreclosing but not naming the 1st mtg, and they think the bids are so cheap they can't refrain... and they end up buying a house for 20K (arbitrary number) with a 100K first mtg on it... of course they hadn't planned on that 1st mtg being there.

[albacore44]

Not really a loophole, it is all in how the complaint (judicial states) or Trustee action is filed... If the 2nd doesn't name the 1st in the foreclosure then the 1st doesn't go away, simple as that. Sometimes novices attend these sales where the 2nd mtg is foreclosing but not naming the 1st mtg, and they think the bids are so cheap they can't refrain... and they end up buying a house for 20K (arbitrary number) with a 100K first mtg on it... of course they hadn't planned on that 1st mtg being there.

So then what do the do if your current on your 1st ?? Do they have to buy out the 1st ?? what if they dont, they own 1/2 a house ??. they can force you out without buying off the 1st ??

i have no heard of many 2nds foreclosing, but i'm not in that business, you seem to have a lot of knowledge on the process.

[brokenomore]

Sometimes novices attend these sales where the 2nd mtg is foreclosing but not naming the 1st mtg, and they think the bids are so cheap they can't refrain... and they end up buying a house for 20K (arbitrary number) with a 100K first mtg on it... of course they hadn't planned on that 1st mtg being there.

This happened in my case. The second had a sale, listing only the cost to buy them out and not mentioning the first mortage (which I think is kind of sneaky--to hope for an ignorant bidder).

They got a bid of around $80,000, but somehow the bidder found out about the first and was able to reverse the funds on a cashier's check.


What really bothers me is that the second dragged their feet instead of working with me before the first did their sale. We could have come up with something that would have kept us in the house and with them getting something out of it, and they gave me the impression they were at least going to pay off the first and take ownership, but they let it go to sale.

I wonder now if they have any claim at all on the house, and if I were to somehow buy it back, if their lien would renew.

[Mensa1]

So then what do the do if your current on your 1st ?? Do they have to buy out the 1st ?? what if they dont, they own 1/2 a house ??. they can force you out without buying off the 1st ??

i have no heard of many 2nds foreclosing, but i'm not in that business, you seem to have a lot of knowledge on the process.

in tht case the 2nd owns the house with a 1st mtg on it... just like any homeowner, if they don't pay the 1st, or pay it off, then the 1st will foreclose. Of course they could always have held the sale and named the 1st mtg and then at sale both liens would be wiped out. When they don't name the 1st and it survives the sale of the 2nd mtg it just keeps the 2nd mtg holder from forking over so much $$$ at the sale, but they still get control of the house. In the OP situation, as you can see, the 2nd made some bad choices; they paid to hold the trustee sale, then eventually got foreclosed out completely, not recovering any of the value of their mtg plus incurring costs to try to enforce their mtg/dot.

This happened in my case. The second had a sale, listing only the cost to buy them out and not mentioning the first mortage (which I think is kind of sneaky--to hope for an ignorant bidder).

They got a bid of around $80,000, but somehow the bidder found out about the first and was able to reverse the funds on a cashier's check.


What really bothers me is that the second dragged their feet instead of working with me before the first did their sale. We could have come up with something that would have kept us in the house and with them getting something out of it, and they gave me the impression they were at least going to pay off the first and take ownership, but they let it go to sale.

I wonder now if they have any claim at all on the house, and if I were to somehow buy it back, if their lien would renew.

First off since the 1st mtg has now foreclosed and the 2nd mtg is gone, assuming that the high bid was just equal to the 1st mtg then the 2nd mtg gets nothing, notta, squat. Their rights have been foreclosed.

Your story about the lender not working with you is all too familiar; it makes NO sense what these lenders do. They are simply inept and seem to operate with a business plan steeped in lunacy. They deserve what they get, in most cases today; NO wait, they deserve fare less, IMO.

Regarding the lender being sneaky, it really isn't their responsibility to educate buyers at a trustee sale. This is big time biz and it is amazing that folks show up and bid on a property w/o understunding the requirements and risks. And their plenty of risks buying property in that venue. No other place does the term Caveat Emptor apply more than in this setting.

If you bought the proeprty back from the 1st mtg lender then the 2nd mtg/dot is gone. If you exercised any redemption rights to reinstate, (I am not familiar with your states laws on this aspect of redemption) then the 2nd lien would be back in force. So anything you did there would be best done if you allowed the property to clear the sale, the 1st mtg holder be vested as the owner, and then purchase it from them. In that case the 2nd mtg holder is gone just the same as if any other person buys the property.

[justbroke]

Actually justbroke, the foreclosure that occurred here can happen just the same way in a judicial foreclosure state too. It is all in how the Plaintiff writes the complaint, and if they do not include the 1st mtg as a Defendant in the suite, then the foreclosure is "subject to" (not including) the 1st mtg.

Florida courts, from my reading, invalidate the foreclosure if all defendants, including 1st, 2nd, other junior, are not included... even the HOA must be listed as a defendant. Of course, MERS was involved, so. Perhaps this is one of those areas where it differs across States?

[brokenomore]

We could have cut a deal with the first mortgage.

We could have stayed in the house in a lease-back program that Fannie Mae has.

All the second mortgage accomplished was to throw us out of our home. They didn't get anything for it.

[CCsAreEvil]

That's messed up that they pretty much threw you out of the home. I wonder if that's going to start becoming the norm from 2nds.

[Mensa1]

That's messed up that they pretty much threw you out of the home. I wonder if that's going to start becoming the norm from 2nds.

Doubtful that you will see many 2nd doing this.

Think about it this way... if you owned the 2nd and it was essentially worthless due to market value of the homes dropping. You legally could foreclose, but what you are essentially doing is making sure that the 1st mtg gets paid off, but there is nothing left for you as the 2nd. So you have effectively spent thousands more in legal fees to get still nothing from the mtg. How many of those are you going to do??? (before you employer fires you).

Keep in mind these decision makers are employees... the ones who made the loans are probably already gone, but the ones enforcing the defaults (loss mitigation) are trying not to make equally as bad of decisions as the lenders who mades these loans, so they can hang onto their jobs.

[brokenomore]

In my case it was two individuals--hard money lenders.

I think they thought there was more in the house when they began the process, and I did everything I could to point out to them there was not enough value, and I came up with several proposals that would save the house for use and allow them to make back at least half of what they had in it, but they wouldn't listen.

[Mensa1]

In my case it was two individuals--hard money lenders.

I think they thought there was more in the house when they began the process, and I did everything I could to point out to them there was not enough value, and I came up with several proposals that would save the house for use and allow them to make back at least half of what they had in it, but they wouldn't listen.

HML's can be like making a deal with the devil; never a good outcome. For a HML to get involved in 2nd position, there must have been quite a bit of equity in the property at one time...

[brokenomore]

When I took out the second mortgage, we still had $100,000 equity.

It's still hard to believe that the equity and all the second got wiped out.

Some of it was because of getting behind on the first, but most of it was the huge drop in value.

If only I had sold it then...

[brokenomore]

The second was a horrible loan. I don't know what I was thinking, but I was desperate.

There were huge fees upfront. It wa a 14% interest only loan, with a balloon repayment payment in three years.