The property, that I am holding the 2nd mortgage for $53,000 is in the foreclosure with the 1st Lender now. My Mortgage get recorded in 1st lien position. The 1st Lender filed the foreclosure with my name as defendant, emphasizing their 1st position. My attorney tell me to file foreclosure demanding my 1st position ( but attorneys sometimes just want to get a deal to get paid don’t matter what outcome will be for me). What should I do, to file foreclosure with the hope that My 2nd will be paid off by the bank? ( Is there any guaranty they will do that? ) Or should I do a short sale on the 1st?
Please , need the answer ASAP. Please. Thank you.
If your lien was filed first, you’re in first position and hold the first mortgage, regardless of the amounts.
Did the buyer default on payments to you, too?
Keith
Vert,
Glad to meet you.
Was there a first mortgage on this property, then you filed your second after that?
I think you are confusing what a 1st lien position is in relation to a what a second position is at least the way I read your post.
If you are in second position you could get wiped out when the property is sold in foreclosure if it does not sell for enough to cover your postion.
If this is the case then you can negotiate with the first lien holder trying a short sale however, I do not think they will because it looks like they have quite a bit of equity in the property and would be covered if it sold at auction or as a REO.
Is this the case?
John $Cash$ Locke
Thank you for responding to my question.
I will clearefy. I have created 2 nd mortgage the next day after the 1Mortgage. But my document get recorded about 2 weeks earlear, than 1st. Attorney is sayng we are in 1 st position now. Should I hope for being paid at the foreclosure sale or better try it to short sale before foreclosure sale?
Yes, my mortgage is in defolt as well as the other one.
Thank you.
If your mortgage was RECORDED first as you say, then you are the first mortgage even though the other mortgage was generated first.
This puts you in a stronger position. Have you filed the foreclosure yet? If you foreclose, it can wipe out the second and they’ll get nothing, so you have a strong negotiating position…
Listen to your lawyer…that’s why he makes “the big bucks” (at least hopefully!)
Keith
In FL, the recording order of liens determines their mortgage position, this might be different state to state.
I don’t know what happened that you were able to record first, but as long as there is not a subordination agreement or some other contractural mechanism that would prevent you from being in first position, you are probably in a good spot.
I’m not sure, but I think that repayment position might change based upon filed litigation.
If I remember correctly, when I was in NY, their repayment order was based upon lien order and year filing order.
Basically, a mechanics lien would be first order to be paid if their litigation was filed December 2005 vs a first mortgage that filed Jan 2006…
You may want to go deeper here with your attorney… do some light reading from the NOLO series of books…
Something you could do, if you have doubts about your exposureand the cash, is bring the other mortgage current and then go ahead and file a foreclosure notice yourself. If you are in second position (depending on how your state law reads) you will protect yourself. The borrower will still have to bring you current to cure the default. If it does go all the way to foreclosure, by that time you will have determined whether or not the 1st Mortgage has to be paid off. Either way you would win.
I think you need to found out one thing.
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Are you the first lien holder if you are in a state where “race to the court house” rule applies You are in first position and after the mechanics lien and tax liens are paid you are the first one to get paid. But, different states may have different rules about that.
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If you are in the first position then you have more negotiation power with the bank. So you have to tell them that if they foreclose they may get nothing (depending on the market).
And if you like you may offer them some $$$ -
You can start the foreclosure process yourself to get your money. Then the bank to protect it’s stake must come and do some bidding if appropriate.
That’s my 2c. Real Estate Attorney help is highly recommended since foreclosures are generally very complex.
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Good Luck!