First lien payoff


#1

I am wondering how this works:

A lien in second position for a property I am interested in is being foreclosed on. If I bid over the minimum bid for this lien, does the value over apply towards paying off the 1st position lien? Also, do you pros have any tips on figuring out the value of the 1st position lien when the homeowners is not being cooperative? Also, do I pay for the 1st position lien immediately at time I win the foreclosure auction, or do I sit down with the bank to work on paying it off?

Thanks for the help


#2

First in time is first in line … and once bidding goes past the full debt due on the loan going to sale, any overage goes to the next in line (recorded debt in good standing) until they are fully paid and then to the next and so on and so on. On occasions (rare) there is also some overage that goes to the delinquent homeowner who probably should have attempted to sell the property vs let it go to foreclosure.

You can find the full amount due in the notice of trustee sale that has been recorded. It will show as the published bid amt and will be "as of" the date of the NTS. Amount will grow until loan is sold at auction. If you want to know the original loan amount, it will be referenced in the NTS by doc number and recording date. Easy to find who made the loan and the amt. Foreclosure Radar also publishes much of this data for subscribers.

Most mortgages have a payoff requirement once title changes to a new owner. Some lenders will allow you to bring the loan current (paying the back due amt) and continue to make payments (effectively stepping into the shoe of the previous borrower) … but you should be prepared to pay off the full amount due. Best to be proactive and contact the 1st lender. That way you can get clear title.


#3

Need some clarification here - When we are bidding in trustee sale we are going against the loan and any outstanding fee & charges or just the loan ??

I am looking to bid on a trsutee sale against the loan position 1. The current amount owed in the published bid is much higher than the loan amount itself. Once I win the bid - will I be responsible for the difference between the loan amount and the fee /charges which is making the overall published bid very?high? or can I assume that I bid against the loan position 1 and everything related to it and amount I paid as winning will take care of any additional charges /fee?

Thanks for your help!


#4

Just the loan … lenders sometimes discount (open bidding) well below the full debt they are owed. Even when the lender opts NOT to discount, they cannot place an “opening bid” for any more than the full amount owed on that loan. If there is still equity in the property (above the full debt and after accounting for payoff on property taxes and recorded debts senior to the loan) and competitive bidding amongst investors attending the trustee sale pushes the bid above full debt owed on that loan … then there is “overage.” The trustee cannot pocket the “overage.” Instead the lender/trustee must distribute the excess funds to the next lender/creditor in line (first in time is first in line). So let’s say the full debt on the loan going to sale (a 1st deed of trust) was $435,642.14 and the trustee/lender gave the auctioneer instructions to place an opening bid @ $405,000 and the property is worth appx $565,000. There is also a 2nd loan for $100,000. The bidding would start @ $405K and investors would likely bid this up. Let’s say the winning bid was (sold to a 3rd party investor) $459,000. There would be appx $23,358 in overage from the bid (sale) that the trustee must pay to the next recorded lien-holder in line. The 2nd loan in this case would suck up all of the overage. The good news for you as a trustee sale buyer is that the remaining unpaid amount of the 2nd loan is wiped out to you (not your responsibility).?