Posted by JT-IN on February 01, 2008 at 06:16:50:
Without looking at a specific case one would determine that the other bank would be a secured defendant, one that had an interest in the property as a result of a Jr lien. Or, the Jr lienholder could have brought the action, (a lawsuit judicial states), and the Sr. lien could be making the purchase, but this is less likely.
Also, loan servicers will bid for the underlying lien owner, then assign the bid to the lender who actually owns the paper, in some instances.
In any case, the lender who is buying is now in a position of an REO, who will later sell the property, and in many cases for much less than they bid at the auction. Hard for laymen to follow this logic but it has to do with being able to pursue def judgment against the debtor, as I see it.