A loan was recorded late than Line Credits, can the LC be wiped?


#1

I won a bid for a loan which is recorded late than a Line of Credits. What the situation I am facing now? Dose the loan become the 2nd position and I still need to pay the money of outstanding Line of Credits? Can the Line of Credit be wiped off after this trustee sale?

Also, since the loan is recorded late, after my winning, do I in tilted to occupy the property?


#2

? ? Was the foreclosing loan a “Purchase Money Loan”? ? (A loan used to finance the purchase of the property?) ?If not, was it used to pay off a loan that was used to purchase the property?

? ? ?You need to obtain a chain of title. ?If you know someone in the real estate business, they can get one for you for free.


#3

Patricia … Miket is right … you should check with a real estate pro or title company to verify the position of the loan you purchased at trustee sale. In most cases a HELOC (home equity line of credit) will be fully paid-off (full “reconveyance”) before a lender will make a new loan that might be in a junior position. If the HELOC(s) and the loan you bought at trustee sale, were made by the same lender, then that lender would typically make sure the larger **of the two open loans was/is in **senior (higher priority) position. If not by recording date, then by a subordination agreement. But mistakes can happen, and old unreconveyed HELOCs, on occasion, get past the lender’s title company cross-checks. So … for your peace of mind, best to get a title pro’s confirmation of the open loans position (i.e. 1st, 2nd, 3rd etc.)


#4

Danny - A little off topic. I have seen more than one situation where the HELOC was not paid off. Or, was paid down to zero and the account not closed, so the borrower kept borrowing on it. The HELOC, not being reconveyed, was still a first. I bought one of these (with some others to spread the risk) knowing we couldn’t get title ins. for a while. The lender on the 2nd, (thinking they were a first) had a sale set a month out. We notified them to “cease and desist” and they were clouding our good title. We never got a response, but they kept postponing the sale month by month. When the year was up and they would need to republish, if they did have a good loan), they didn’t. We were able to get title ins. a few months later and sell the property. (We rented it in the mean time.)


#5

Yes … I have also seen a few old un-reconveyed HELOCs that were never closed and missed by subsequent lenders. In one case, the home had been sold twice (since the delinquent borrower’s ownership) and the last buyers had put 40% down and were of course current on their own loan. Must have been a shock when they had a notice of trustee sale posted on their door. In this case, naturally, the new owners made a call to their lawyer and the title company who erred (missed the old ‘open’ HELOC) promptly paid off the HELOC before the trustee sale. I also saw one that went to trustee sale (and snapped up by 3rd party) a couple of months ago … I did not attend that auction as it was out of my ‘happy drive zone’ and a late bid … Not sure if it was a HELOC? … But it was an old 1991 loan (less than $100K published bid), in senior position, and another bank later (2005) made a $250K loan in junior position … and no subordination agreement. Property was worth about $300K. It (1991 loan) went to sale at the steps. Not sure if an investor bought … or if the junior lender sent a bidder to defend? Regardless, it was evidently a lender mistake (had to have missed the old open/senior loan).


#6

This is just estimated, not guaranted by Foreclosure radar