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Bidding on a 2nd Deed of Trust / Mortgage & Dealing with the 1st Mortgage

This pertains to a Trustee Sale in Las Vegas.

If I bid on a 2nd junior mortgage at Trustee Sale, and I’m comfortable with the 1st mortgage amount, as well as the equity in the house, I have a few question on dealing with the Senior Lien.

1.) Do I have the option to refinance, providing there’s enough equity and I can do a quiet title action?
2.) If I have a non-assumable First Lien, can I reinstate the loan and continue paying the Senior Lien off? Or are we almost always looking at a call of the note with “due on sale”?
3.) Will the first generally work with me even though it’s not my loan?

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Hi Ian, few questions and I’ll make sure @Sean_OToole sees this:

  • What are your plans? Work out a payment arrangement and get the junior lien performing?
  • Is the senior lien in default? Or only the junior lien?
  • What would be your ultimate goal?

With regard to buying 2nds, here are my general tactics:

  1. Do everything I can to get the payoff on the 1st before the sale. Be very careful of things like negative amortization loans, though fortunately, those aren’t very common anymore.
  2. Buy the 2nd assuming the first will exercise their due on sale clause and have a plan for paying it off. They can’t just take the property, they have to go through the foreclosure process, and if they haven’t started that you have quite a bit of time. If they have started I make sure I can come up with the funds prior to the earliest possible foreclosure date.
  3. After buying the 2nd, I try to work with the prior owner/borrower on cash for keys, and explain to them I’d like to make the payments on the 1st, which will help with their credit. I find that if they give me their coupon book or online login, and I just make payments the lender will often accept them. Though with monitoring of title activity becoming more common with lenders, I wouldn’t count on this lasting long.
  4. If 3 doesn’t work, I’ll try to contact the lender and ask to make payments. They’ll often work with you for at least a period of time vs starting the foreclosure process.
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Does anyone know if this is being put in practice by banks or loan servicing agencies?

Junior Lienholders May Now Obtain Senior Lien Payoffs

“Prior to January, 2020, as a creditor with a lien on real property, you could not obtain a payoff directly from any other lien holder on the same property, without obtaining consent from the borrower. However, under House Bill 2459, effective January 1, 2020, a person, or agent of a person, that holds a lien on real property may now request an itemized statement of the amount necessary to pay off another lien that is an encumbrance on the same real property. The purpose of this law is to allow junior lienholders to evaluate senior liens prior to foreclosure.”

Junior Lienholders May Now Obtain Senior Lien Payoffs

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Hi @EquityRadar! Thanks for the intel and in case anyone wants access to the actual Oregon rules on 2459, here’s the link..

I don’t know anyone at the moment who buys seconds in the market or builders where this might really come in handy. How nice would it be to get an itemized position as a lender or contractor that sees liens but don’t have more detail on what’s happening in the background.

How are you thinking of using this? Are you buying notes?