I hold 2nd mtg on a building. The church that owns it is having financial troubles and has fallen behind on both mortgages. Is it true I must foreclose 1st before the primary mtg holder in order to control the sale? If they foreclose 1st, am I assured of getting my mtg paid off?
Only way you can protect yourself is to foreclose before the 1st (then you would be responsible for the 1st) or make payments on the 1st so it doesn’t go into foreclosure.? You could wait until the 1st goes and try to win the bidding on the 1st.
When a 1st goes thru foreclosure all later deeds of trust are wiped out.
Thanks leavcast, great answer. I would add that your strategy also depends on: a) how much equity is the property, b) how much cash you have available to protect your position, and c) whether or not you want the property yourelf. ? For example if your second is totally underwater you may be better off not foreclosing, and not protecting your secured position at sale. This is especially true if your loan was not used to purchase the property, as you can continue to try to collect on the loan after the first forecloses, and even though your secured position was wiped out by that foreclosure… but only if you don’t foreclose. ? If there is equity, but you don’t have the cash to bid the 1st up when they foreclose, then you should be sure to foreclose first (you should be able to make payments on the first to protect your position). ? If you want the property, you may want to try to negotiate a deed-in-lieu of foreclosure. ? Many strategies - a good real estate attorney that has lots of experience acting as a trustee should be able to help you find the best one for you.
Under the Anti-Deficiency Statutes set forth in the California Code of Civil Procedure (CC Sec 580(b), 580(d), 726(a)) you may be better off allowing a senior lender to foreclose, thereby extinguishing your Deed of Trust, and thereafter pursuing the Borrower under the provisions of your Note.
However the first question you should ask is whether there is equity in the property, and are you able to service the senior debt if you foreclose. Once you determine the answers to those questions we can lay out your options for you and explain the pros and cons of each. I work for an Attorney in Newport Beach and we help Trust Deed investors recover their investment after they have lost it through foreclosure. We prosecute legal actions in the Superior Court to obtain personal judgments, then pursue the enforcement of those Judgments on behalf of our Clients on a contingency basis. If you would like to discuss further please email me firstname.lastname@example.org