I have a question regarding a home was bought in the third lien position and then later the first lien forecloses. Do you know what happens to credit scores of the two different owners?
This is in California.
Owner AAA buys a home and takes out three mortgages (deed #1, deed #2, deed #3).
Deed #3 decides to foreclose on the home.
Owner XXX buys it not knowing there was a senior deed #1 and #2. She did not know the previous owners. Owner XXX has a deed in her name which we will call deed #4
Owner XXX receives a foreclosure notice from Deed #1.
Deed #1 forecloses on the property. All junior liens are wiped out.
Owner XXX keeps making the mortgage payments to deed #4 so she does not default on this deed that is in her name while the matter is being legally worked out. She hopes her lender will not demand the remaining balance immediately.
Even though owner XXX was not on the deed #1 which was just foreclosed upon, will her credit score be negatively affected because she was the owner at the time of the foreclosure? Or does the credit damage by a foreclosure only follows the name whose deed was foreclosed upon.
I am not clear as to what happens in this scenario when the owner XXX with the current title of the home is a different person than the deed that is foreclosed upon in California.