Im here in Ca, bought property at trustee sale . Property had 1st through bank and a 2nd which is a loan through the city . It was a rehabilitation loan given to the previous owner to remodel and improve the home.
I understand these loans were at low or no interest and could be forgiven after a determined amount of years. Has anybody run into these ? Do they survive at Trustee sale. ?
If it is really a second mortgage and not a HERO loan, then it should be wiped out by the foreclosure sale. HERO liens (Home Energy Renovation) are essentially tax liens, and are considered superior liens, making them senior to all mortgages. If it is a HERO lien you’ll have to pay it off. 
Hi Sean , I don’t think its a HERO. Its a $95,000 loan and the note does not mention anything about it being used for home energy renovation . I have seen these Heros before and they are usually $5,000 - $20,000 range.
The 1st was $25,000 so quite a few people showed up, the only reason I was second guessing myself is the City Manager and City Attorney showed up to the auction and basically did the buyer beware bit. Lol…
Oh, very interesting on the city showing up. Did they say anything about their legal basis for the loan being superior to the mortgage? Sounds like your next step is to talk to the title company - in the end, if you plan to resell, what is even more important than the law is whether or not the title company will give you title insurance. If they will, you’re done, it will be title’s problem not yours if the city sues. If not, then the law bit matters, and you may have to go to court to quiet title in order to get title insurance.
Has the city sent you a payoff demand? Do you know how they collect the payments? Hopefully the payments aren’t added to the property taxes. Generally I’ve had little luck getting out of any liens that legally roll to the tax role.
Above is just based on my experience, I’m not an attorney, and if title says no, hiring one is probably your next step.
Hi Sean , yes it was a very interesting auction . The property had been on my radar but I knew eveybody and their brother would be showing up because of that small $25000 1st .
My intial point of caution was making sure there wasn’t subordination clause lurking around but everything looked ok. When I showed up I initially thought there was city employee work strike . There were about 80 people around the steps . I got down and recognized a few of the regulars and I asked whats the deal ? He said they are all here for the same house . Obviously not a good thing for me. I saw a couple of guys in suits next to auctioneer talking on the phone very animatedly . I asked the auctioneer who are these guys ? He said its the City Mgr and City Atty. They’re trying to get the auction postponed.
Long story short Trustee told them to take a hike and auction started. Thats when the suits told the crowd whoever bought would have to deal with them . This turned out to be a blessing for me as that only left 5 bidders . They both stayed and watched the auction . After I won I asked them " ok I,ve won , show me your cards. what information you do you have to support your stance.
They said I would find out later. I asked if they were so sure about their interest why city mgr and atty have to show up at auction and try to postpone. That drew some blank faces . So doing the title discovery search with title company Co. I should know in a couple of days.