Question on First Note VS. 2nd note? - Posted by JohnBoy
Posted by JohnBoy on December 03, 1999 at 17:43:28:
Let’s say a person had originally taken out a first mortgage for $50k. The person has a problem with making payments and turns to HUD for help to lower the payments by half for a 3 year period. Meanwhile interest accrues on the payment amount that was reduced for 3 years bringing the pay off amount up to about $75k.
Does the bank need to record anything against the property to protect it’s interest in the amount that had accrued over the last 3 years?
What would happen if after checking title only showed the first recorded only showing the original $50k that was borrowed and then someone was to record a new second mortgage against the property for the $50k equity?
Would the first lose their interest in the amount that had accrued because of the 3 years they reduced payments or would the original first recorded showing only a $50k mortgage automatically protect their interest in the additional amounts that had accrued above the original $50k first even though they never recorded anything against the property to protect their additional interest?
What I’m asking is:
The property is worth $100k. Title only shows a first mortgage for $50k. Owner really owes $75k because of reduced payments for 3 years accruing on the principal.
If I was to create a new second mortgage for $50k and the first was to foreclose, would they still be entitled to collect the additional $25k that accrued in back payments without recording something or would the new second mortgage be entitled to anything above the original first only showing a first mortgage of $50k?