Foreclosure Question: 2nd Mtg Holder Recourse? - Posted by Tim

Real Estate Investing
#1

Posted by Ben (FL) on February 05, 2001 at 08:24:30:

The second can foreclose, but to do so they have to payoff the first. Unless the balance of the 2nd is a significant % of the value of the properyt, or there’s LOTS of equity, they probably will not do that.

Whenever someone who is in foreclosure calls me, they often have a 2nd, sometimes a third, mortgage that together with the first adds up to more than the property is worth.

The only way to go is to call the junior lien holders, tell them (in case they haven’t yet been notified) that the first is foreclosing. If the foreclosure goes through, their interest is wiped out, so offer them $2,000 to settle the loan.

If they do, then you can either payoff the first with new financing, being sure to include enough of a loan o payoff the settlements on the junior liens, or pay the settlements and take over the first, subject to.

Or, if the sellers are amenable and the juniuor lien holder tells you where to stck your offer, you cold offe rthem $2,000 to remove the lien from the property, but keep the sellers responsible for it. It won’t help the sellers much, but it may help you.

#2

Foreclosure Question: 2nd Mtg Holder Recourse? - Posted by Tim

Posted by Tim on February 04, 2001 at 20:49:52:

If a 1st mortgage holder forecloses on a property and the 2nd mortgage gets wiped out, can the 2nd mortgage holder go after the borrower for the amount owed (i.e., get a judgment against the borrowers and try to collect on it)?

A seller called who is behind on both her 1st and 2nd mortgage. She is divorced and the divorce decree states that she pays half and her ex-husband pays half of the 2nd mortgage. She is supposed to pay the 1st. I’m trying to find out what recourse the 2nd mortgage holder has against both her and her ex-husband if the 2nd gets wiped out through the foreclosure of the 1st.

Note: This is in Illinois.

Thanks for your help!

Tim

#3

2nd Mtg Holder Recourse? - Posted by Bud Branstetter

Posted by Bud Branstetter on February 05, 2001 at 09:45:29:

A second lienhold, in mosts states, can protect their interest by catching up and making back payments etc. Same for taxes, even do maintenance. Then foreclose themselves. They do not have to payoff the 1st loan in order to protect their interest.

Yes you can go back to court if the security for the loan is wiped out and get a deficiency judgement against both the husband and the wife. You don’t have to foreclose to sue. But once there is the judgement you couldn’t foreclose and you have to collect. Small amount can be in a small claims court but larger amounts take and attorney and several thousand just to get a judgement. Do some work to see if it is worth it. Another possibility to to forgive the debt(if they don’t have it) and send them a 1099. At least the IRS will try to collect and you would have a write off.