Posted by Bud Branstetter on January 28, 2000 at 22:04:10:
Stacy,
In most cases there has to be a demand to cure the default before you post for foreclosure. Junior lien holders can cure the defaults and then demand themselves. The less sophistcated the owner is the more pressure you can put on them. But is not better to offer carrots instead of sticks. The larger the equity interest the more likely they are to fight. You would likely lose a fight if you nitpick.
Puzzle for the Pros? Staged Foreclosure? - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 28, 2000 at 17:06:00:
Here’s a puzzle-
Suppose a lady named Sam buys a MH and land (attached) from a guy named Alice, who owns free and clear. Sam gives Alice a $50K note and trust deed, $300 per month for 20 years, assumable no qual.
Years later, Sam sells to a guy named Leslie on a wrap. Leslie gives Sam a note and trust deed for $100K (subject to the first), $600 per month, with a balloon due in 5 years, assumable no qual.
3 years later, a lady named Stevie gives Leslie $20K cash, and assumes the wrap, making the $600 payments.
Stevie can’t get refinanced for the remaining $90K owed, because the MH is 40 years old, even though the new additions make it a nice house. Sam refuses to negotiate the balloon. She wants the property back.
Suppose Stevie contacts the original owner (our buddy Alice) and buys the original note, with a balance due of $40K for $25K. She now lives in the house, pays Sam $600 per month, and receives back $300 per month from Sam. There’s still a nasty balloon coming due on the wrap.
Suppose Stevie found a reason, specified in the original trust deed she now owns, to foreclose on nasty Sam, who is the payor on the 1st note. Suppose there was a payment that was a day late, or taxes were not payed 5 days in advance (Stevie pays the taxes, so she could pay them a little late). Legally, could Stevie foreclose on nasty Sam under these conditions, as specified in the DOT?
And if so, nasty Sam could cure the default by paying the entire note balance due ($40K). And, could Stevie then take this money, add $50K to it, and pay the $90K balance back to nasty Sam to pay-off the wrap mortgage?
If so, did Stevie just buy her current home for around $75K, and satisfy the balloon?
As another option, after starting the foreclosure on nasty Sam, could Stevie use this as an incentive for Sam to rewrite the wrap, in return for Stevie stopping the foreclosure?
Stacy
Re: Email reply - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 28, 2000 at 18:22:59:
I received a helpful email reply, stating that it’s dangerous to foreclose on small technicalities. Actually, I guess that’s good news, since I’m a payor on a couple of mortgages myself.
How about just accelerating the loan, to try and get nasty Sam to negotiate? Same prob?
Stacy