foreclosure by a junior lender when both first and junior lenders are on the same property .


#1

what if the junior lender foreclosed on the property and took? the ownership or title of property.and did not pay off the first lender,how would the first lender inforce the pay off of? their first lien, even if? the borrower was in default on both liens.could this happen and be legal for a junior lender to do.


#2

If the junior lender forecloses they will need to bring the first current or pay it off. If they fail to do so the first will eventually foreclose to take ownership of the property. And no, the junior lender is not under any legal obligation to pay off the first.


#3

thanks Sean, i don’t? think i understand? this very clear.how can a first lender foreclose on a junior lender . because if the property is in the junior lenders name ,now after the auction what would have to be done to get that junior lien holder? off of a property that they do not hold a first lien on ?


#4

The firsts loan is superior to that of the second. When the second forecloses nothing changes for the first, except that the foreclosure sale likely triggered their due on sale clause which means the first doesn’t even have to accept payments from the junior lien holder. If the junior lien holder fails to pay the first, the first can continue with the foreclosure as if nothing had changed at all. ? The key thing to understand is that the law is setup such that the homeowner can’t do anything to the title of the property (new loans, change of ownership, etc) that will hurt that original lenders rights in the property. If this wasn’t the case, then lenders would require we get their permission before we got additional loans. ? This is why when the first forecloses it wipes out the seconds interest in the property. That simple fact allows the first to have comfort they will have a shot at recovering their investment regardless of any addition loans. If the second wants to protect its investment it can make payments on the first or buy the first at the foreclosure auction.


#5

thanks Sean, what you are saying is i would have to continue on with my foreclosure on the property. except when I started the foreclosure ,it was foreclosing against? the borrower? ( home? owner?) where now my foreclosure would be against the junior lender ,? I am the first lender so what you are saying is I can continue on with the same foreclosure just by changing it from foreclosing against the home owner to this junior lender. because the home owner was foreclosed on by the junior lender. so now the junior lender is on the property? title as primary owner. the home owner was in default with both of us lenders before the foreclosure;s were started. also is foreclosing on this junior lender my only way of taking my position of protecting my asset as the first lender at this time. or is there other ways to do so . because as the first lender I have not been paid off . what? i am trying to say is there other options for me to do this.because what i would like to avoid is a costly law suit against the junior lender maybe for wrongful foreclosure i suppose.thanks Sean


#6

You are foreclosing on the loan, not the borrower, so I don’t believe you have to change a thing. As long as you have noticed the junior lender as required under civil code 2924 you shouldn’t have any problems. If you are doing the foreclosure yourself, I would suggest turning it over to a trustee service company (attorney that specializes in foreclosure) and have them review your filings to date, and then either re-file if there were mistakes made, or continue if the filings so far follow the law. ? If I were in your shoes I would be doing everything I could to expedite the process and get the property back sooner than later both to insure no damage is done, and to get it resold sooner than later as most of this market is still declining. ? If the second wants to protect their position I probably would not let them bring the loan current, and instead force them to pay me off (may require that you have a due on sale clause in your DOT). ? In any case you should definitely be working with an experienced trustee, as the foreclosures laws are changing regularly right now and it would be easy to miss something in this environment.


#7

thanks Sean, ? I? have a promisary note ,secured by an assignment of a deed of trust, signed in front of a notary public by the property owner for the money i loaned to her.my documents were also recorded in the proper indexs with the county recorders office. but the second lender that foreclosed on this property already . they said that my deed? did not show up on the property when their title co. searched the title when they made? the loan to the property owner. they said that it did not show? up because it was worded assignment of deed of trust, however i do not agree with them and i am still before their loan also my deed was recorded in the proper indexes and my date of recording was before theirs. however this lender did know that I was a lender on that property when they made their loan to the property owner , because they asked the property owner to see if I would remove my deed to allow them to do their loan and record their deed , and?then record mine back on after theirs. I would not do that and that lender told the property owner that they had their own in house title co. and they would be able to work around mine without any problem. you may know who this lender is just from what i have said here .regarding the way they do business.(who else but Ameriquest mortgage, )I thought they were out of business because of? fraud and many law suits. thanks Sean for your helpful information.


#8

If in fact you recorded an assignment instead of a Deed of Trust you may have a problem. But even unrecorded deeds of trust may have a claim. In any case I really think you should seek the help of a good real estate attorney. Best of luck to you.


#9

how can you explain the arizona statute 33-723. Right of junior lien holder upon foreclosure action by senior lien holder

Any time after an action to foreclose a mortgage or deed of trust is brought, and prior to the sale, a person having a junior lien on the property shall be entitled to an assignment of all the interest of the holder of the mortgage or deed of trust by paying him the amount secured, with interest and costs, together with the amount of any other superior liens of the same holder. The assignee may then continue the action in his name.


#10

what if an HOA files a lien for unpaid disputed fines and, since the porperty value is now half the first loan amount, I allow them foreclose and take the property. what happenes to my legal responsibility to pay the first mortgage, must the HOA pay off the first to perfect the foreclosure and take title?


#11

Hi Charles, In most cases the HOA is not a pre-lien which means that when a homeowner falls behind on their dues or has past due fines the HOA must file a lien on the property. This lien is typically recorded after a Deed of Trust since most lenders will not fund a loan unless the dues are paid current. This means that if a HOA forecloses on their lien the prior loans and liens are still due and payable. The HOA would need to pay those loans or risk losing their ownership with the senior deeds of trust foreclose and wipe them out. If the HOA does foreclose you may have a redemption period depending on which state you are from but if you do not intend to redeem the property you may not want to continue to make the loan payments on a property now owned by the HOA.