Posted by JoeKaiser on January 31, 2000 at 23:02:38:
As the holder of a 2nd, you can and must protect your position by taking care of the first. 2nd mortgage holders are permitted to do these things without triggering the due on sale clause.
However . . .
If you bought the property at auction from a junior lien foreclosure, you may indeed have a problem. This, in all likelihood, is a transfer which does trigger the due on sale clause.
That’s why we look to “buy” those seconds from the lenders whenever possible and know we can in fact keep the existing loan in place.
If I were in your shoes, I’d talk to the lender and see what could be worked out. I’d start from the position that there is no default and that I am merely in the shoes of the 2nd mortgage holder and let them sort it out. Often, they give up before going much further. If that doesn’t work, I’d plead ignorance and see what they would accept as an alternative to paying it off on the spot. Perhaps a 12 month balloon or an interest adjustment.
Joe