Not sure of your scenario when you reference both “goes into foreclosure” and “completely removed from the owner”. If the first forecloses, the second is wiped off title and the holder of the first can liquidate the property as they see fit.
The property has been in foreclosure for a while. The owner is has not lived in the property for a few months now. The foreclosure processes is completed as of today. It’s completely removed from the home owner as of today. The 1st and the 2nd loans are from different lenders. A few months ago the 2nd was willing to sell short, but the 1st would not sell short.
Now that the foreclosure is completed. Does the 1st loan now have total control over pricing the house? Can they say the hell with the 2nd loan?
I Think… the owner is still responsible for repayment of the 2nd unless it was wiped out in bankruptcy. and the 2nd is a lien on the property. if the owner is going to sell that 2nd has to be part of the sale. you can try to negotiate with the 2nd loss mitigation for a lower amount.
Correct, AFTER any Redemption period has expired. The 2nd lien is still valid until Redemption is expired and 1st Lender has full possesion of the property legally. There’s been some confusion by some that once it goes to sale, the 2nd lien is wiped out, which is not the case.
Along with the redemption issue there is what is called a “deficiency judgment”. In this case if the second gets wiped at foreclosure sale, and is deficient 75K, they can seek a judgment against the borrower, not all states allow this.
This way, if there is other property that the borrower has it will encumber it. If there is no other property, then it will stay attached to the borrower as an unsecured judgment until he either strips it in bankruptcy or the statute of limitations on the judgment expires, which varies on state.
But most banks don’t bother as it will cost them in time and money while the likelihood of ever collecting is virtually nil.