I have a hypothetical question, I know it’s a stretch but I would appreciate the help.
A home is worth $500,000
There’s a 1st TD for $505,000 from Horizon Bank
And a 2nd TD for $40,000 from Newport Bank
The 1st TD is current. The 2nd TD is not. Newport Bank is now foreclosing on the home and takes it all the way to trustees sale where no 3rd party bids on the property at the trustees sale. Now Newport Bank is the owner of the home subject to a 1st TD valued at $505,000 and the home at $500,000. **The current/true balance on the 1st TD as of the foreclosing date, for simplicity sakes lets say is $505,000**. What does Newport Bank do in this case? Do they have options? If so, what are there options? Do they not pay the 1st TD and let Horizon Bank foreclose on them? Meanwhile, and if I understand this correctly as soon as Newport Bank forecloses, they are legally the owners of the home and can begin the eviction process of occupants who happen to still be living in the home. (However, I’m just thinking out loud here, what if Newport Bank allowed the current owner to keep making payments to the 1st TD so that in the future the balance of that $505,000 would decrease below the $500,000 value of the home and then Newport Bank could sell the home and make a profit?)
Again, all hypothetical but I’d like to get some feedback as I’m just trying to understand 2nd TD’s a little better.