Buyers are not paying on the 2nd - Posted by Steve Carlson

Posted by Eduardo (OR) on February 15, 2001 at 20:36:49:


Here are a few quick thoughts (I’m going to assume you are relatively new at this–you give very little information): Speed is of the essence. If you take the time to send letters (often an excuse not to talk to someone face to face or on the phone), you may wish you hadn’t. You need to find out quickly if the payors are paying on the 1st mortgage or if it is also in default. Often when they stop paying, they stop paying on everything. If the 1st is current, you need to immediately decide whether you want to foreclose and get the property back or not. If yes, then do it right away. If the 1st has already filed for foreclosure, you may have a big problem on your hands. Only you know the details of the 1st and 2nd. Others will give you more extended advice. Just remember one thing: In these situations, the faster you move, the more likely it is that you will protect your investment. Good luck! --Eduardo

Buyers are not paying on the 2nd - Posted by Steve Carlson

Posted by Steve Carlson on February 15, 2001 at 15:28:31:

I’ve a note in 2nd position from a house we sold and the buyers are not paying. Being the uncreative person I am, I was looking for an effective letter that someone may have (or knows where to get) that could be sent to the buyers so they start to pay up.

I doubt I’m not the only one with this problem - maybe some others could use the letter also.

Best Regards,


What to do?.. - Posted by Michael Morrongiello

Posted by Michael Morrongiello on February 16, 2001 at 11:18:37:

Welcome to the world of the “tenuous 2nd lien”…

You are faced with choices here. If the underlying 1st lien is current and up to date and your 2nd lien is not being paid, then you need to decide if you want to :

  1. See if they will deed you the property in lieu of a foreclosure? If they will then ALWAYS do a title search first! if they will not, then you need to decide if you …

  2. Want to start legal proceedings against the property and incurr the costs for attorneys fees, filing fees, court costs, etc. while you enter the unknown and uncharted waters of foreclosure. Remember if you go this route, if they WERE paying on the 1st lien, it is almost a sure bet that now they will STOP paying on that 1st lien loan as well. So figure in the 1st liens appetite for a monthly payment along the way.

  3. If they ARE paying on the 1st lien and if item # 2 referenced above is not an option for you then consider doing NOTHING on your defaulted second other than perhaps some sort of discussion with the debtors that says that you will forego any collection efforts at this time to allow them get back on their feet. You “might” wish to formalize this into some sort of a “forebearance” agreement (Consult with a competent RE Attorney).

Under this arrangement, you allow them to slide while your 2nd lien continues to accrue interest and becomes added to the “back end” of the note. Eventually if all goes well and down the road somewhat, you will start getting paid or paid off. The KEY is to do your homework as suggested and start discussions with the debtors to get a “Feel” as to where they are.

Best of luck.

To your success,
Michael Morrongiello