Posted by Michael Morrongiello on February 13, 2001 at 20:36:04:
Henry:
You now understand why 2nd liens are VERY tenuous at best.
If the note was executed personally and depending on the state the collateral is in, you could elect to abandon the real estate as collateral and sue the individual for collection of the debt (in other words sue on the note obligation only).
If you choose to foreclose on the property then you will be faced with having to make the payments on the underlying 1st lien, pay your attorneys fees, court costs, filing fees, etc. while you are foreclosing on your subordinate 2nd lien. Been there, done that and its amazing how fast equity is eaten up to where there really isn’t anything left.
Moral of the story, 2nd liens that are carried back where there is little real equity into the property by the buyers are Fraught with a lot of risk especially if they go bad or the underlying 1st lien goes bad.
This is why they are often called “throw away 2nd’s”…
To your success,
Michael Morrongiello