Buying 2nd Deeds of Trust

Financing, Hard Money Lenders, Private Money
1

I have the opportunity to buy a 2nd deed of trust at a very deep discount. There is a 1st trust deed on the property and with my purchase of the 2nd deed of trust the total CLTV would be under 60%.

So there is a lot of equity in the property. My question is how can I be sure the payments are being made on the 1st lien?

Also is it true that in the event the first lien holder was to file foreclsoure before I did would that completely wipe my lien out?

Thanks

2

Howdy FundingAZ:

You can get the 1st lien holder to put you on notice if the note payments are late. Do not trust copies of checks or money orders from the owner unless they are endorsed by the bank. I got scammed like that once. They guy went and got money orders every month and made them out and sent me a copy and then never made the payments for 6 months. Yes you will get wiped out and the only way to get your cash back is to sue the owner or if the sale brings more than the first mortgage balance. You have to put them on notice that you have a lien. Mine actually got sold by the County for back taxes that the seller was to be paying. Be careful a lot can go wrong.

3

Ted,

Thanks for the great advice even if the 1st Mortgage holder is an institional bank I can still have them put me on notice if the payments are not made?

I don’t know the owner I’m purchasing a second that has been in place for 8 months so I don’t think the owner would be willing to help me.

So if the 1st lien holder was to foreclose my investment would be protected if the home sold for more than the combined liens?

Thanks

4

Howdy FundingAZ:

My example was the county foreclosing for back taxes. The 1st lien holder is under no obligation to collect money for you. They will send you notice if instructed by the owner. You may have to step in and cure the default on the 1st and foreclose on your second if the owners gets in default.