equity lines in foreclosure
Submitted by jan
from CA
- 12/28/2009 - 9:08am
I have a 1st mortgage (never refied) and a line of equity (refied once) from
the same lender in CA. I am not able to make the payments, will go into
default on both and face foreclosure? Is there anything I can do so that the
lender will foreclose on both loans and not sue me for the the 2nd? I want to
avoid declaring bankruptcy. Is it better to stop paying on both loans at the
same time, or stop paying on one or the other first? If so, which one?
Thank you
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Comments
You indicate that you are not able to make the payments. If you would like to potentially stay in the home you may want to contact your lender about a modification. You can go to the government site www.makinghomeaffordable.gov for additional information about your options. (You will find a list of FREE HUD approved counsellors) As a brief answer to your question there is no way to force the second to foreclose first, or at the same time. Even though the loans are with the same lender they are typically handled by 2 different departments. You may want to consider a short sale where you can negotiate with the second. This will help you avoid foreclosure and give you a chance to negotiate the terms of the short pay. (Hopefully a full satisfaction). The success and ease of a short sale will depend largely on which lender holds your loan. If you elect to walk away we do not see many seconds foreclosing unless there is equity to protect. If the first forecloses the 2nd is wiped off of the property but still has up to 4 years to take their "one action" in the form of a lien or judgement. Of course bankruptcy wipes out that lien. Take some time and look at your options. You are asking all the right questions. The key is to go in with your eyes open and make the best decision for you. Start with looking at modification options, then consult with a qualified Real Estate Agent to discuss a potential short sale, and finally look at bankruptcy and consult with a qualified tax consultant over the potential tax ramifications. Remember that you are not only trying to determine the best way out but also the way that will allow you to recover as quickly as possible. There are more options and streamline approaches that are being introduced everyday so if there was a "good" time to be working on your options this is it. Always keep in mind the most important things in life are your mental health, physical health and your family. The rest is just stuff! Good luck!
Let me add that while I would recommend pursuing a short sale, if you do decide to stop paying you should likely stop paying your second, while continuing to pay on your first, and then hope the second forecloses.
The reason is that by foreclosing the 2nd gives up any right they may have to come after you for the balance after sale, because they have used their "one action" as Michelle mentioned above.
Unfortunately the 2nd may not foreclose leaving you somewhat in limbo. Back in the 90's people went years and years without making a payment on their 2nd, only paying their first. When the market improved this decade lenders resurrected those loans and came back after the homeowner.
Finally, I want to note that every situation is different and we aren't attorneys. You should consult with one before making any decisions. It is really a small price to pay given the significant costs of making the wrong decision.
I have a question regarding an NTS on a property.
Original first filed in 2001 for $253K. 2nd for $50K filed in 2003. It appears the 1st was then taken out and increased in 2005 for $460K.
The $50K 2nd has an NTS due to go to auction on 1/11. The $460K "1st" has an NTS date of 1/18. The lender is the same.
If I were to take over the "2nd" of $48K from 2003, would I be liable to payoff the "1st" from 2005 for $460K since it is the same lender?
How can I determine which is 1st in line? What should I look for in the 2003 equity line docs for $48K that would subordinate it to the 2005 "1st" ?
The property is only worth $300K, so I don't want to be stuck paying $500K for it.
Thanks.
I've gotten a great deal in a situation similar to this... definitely worth doing the research.
You'll want to look for a subordination agreement. Without that the 50k loan is likely in first position. Still, I'd urge you to have a title company, or an attorney familiar with title chains review before you make a purchase. Just not worth the chance.
Thank you Sean. One last question please.
Let's assume that there was no subordination agreement. Let's assume "2nd" is in front of "1st".
"2nd" goes to auction next week and I buy it.
Before "2nd" releases title, "1st" goes to auction (in the next 1-4 weeks after).
"1st" then files ownership with County before I am able to get clear title from "2nd" from same bank.
What happens then? Does the first to file with County with new ownership prevail, even though the property was "sold" at auction the previous week?
If the bank dept holding the "2nd" doesn't release title within the 15 days, how would that affect the bank then going to auction on the "1st"?
Thanks.
As long as you record your trustee's deed within 15 days it is effective as of 8am the day of sale. As such the "1st" would be wiped out effective that day, and there was nothing for them to sell and even if they recorded a trustees deed it would be meaningless.
Again... I haven't reviewed all the specifics of this property and I'm just talking in generalities. If you haven't made friends with the Chief Title Officer at your title company, I'd recommend making that a priority. Buy him/her lunch. At the end of the day you'll likely want to resell the property and if things get a little strange it is a lot easier if you have them on board.
There's a "sticky wicket" in here:
Just looking at the records at the County, reconveyances often are recorded 2-4 MONTHS after a refinance, not 15 days after.
If the trustee's deed isn't recorded within 15 days, due to the bank dragging it's feet, does this mean the sale is no longer effective as of 8am the day of sale, but instead the date the bank releases?
If the "1st" DOES FILE within 15 days of its auction, and prior to the "2nd" releasing theirs (who waits beyond the 15 days), which would make the "1st" effective the date of auction and presumably the "2nd" the date they release, instead of the date of auction,
Then what happens?
That's the rub...
Look at it this way. If a 2nd is taken to sale BEFORE a 1st is taken to sale, the 2nd is still wiped out wiped out by the sale of the 1st. There is nothing a 2nd can record to affect the position of the 1st. So if your "1st" is truly in 2nd position it shouldn't really matter when trustee's deeds are recorded. And remember 1st, 2nd, 3rd, is decided solely on recording sequence and subordination agreements, not amount, not who the lender is, and not anything claimed on the document (simply writing 1st on the doc doesn't make it one).
Thanks Sean. That's really helpful. If a first is auctioned and there's still an outstanding second and third, are they wiped out by the auction? If you bought the first at auction, would you own the property clear of the second and third?
That's correct.
Thank you Sean. It is now a moot point as I just got back from the County. There is a subordination agreement filed in Dec 2009 that is not yet showing on Foreclosure Radar. There is also a previous subordination agreement from either 2003 or 1997 (can't remember which at this point) that is also not showing on foreclosureradar.
Is it even possible for foreclosureradar to pick up these subordination agreements? I know there are sometimes untitled docs showing, but how could the company even pick up the specifics?
We do not abstract subordination agreements so we will not show them. Same thing is true for judgements, IRS liens, etc. For the most part we will only show loans and transfers.
Great learning experience. Sooner or later you will find one of these diamonds, but they are reasonably rare.
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