Posted on: 17th Dec, 2007 11:53 am
hello, and thank you in advance for your advice.
i own a home that has a first and second mortgage. it is going into foreclosure with the the 1st mortgage company. the 2nd mortgage holder has requested a quit claim deed in order to have the ability to sell/short sell the property and recover some of his investment.
i understand the legal aspects of the quit claim, what i don't understand is what happens if he finds a buyer for the property for far less than is owed on the 1st mortgage. and does the foreclosure create a lien on the property that has to be satisfied?
thank you again.
i own a home that has a first and second mortgage. it is going into foreclosure with the the 1st mortgage company. the 2nd mortgage holder has requested a quit claim deed in order to have the ability to sell/short sell the property and recover some of his investment.
i understand the legal aspects of the quit claim, what i don't understand is what happens if he finds a buyer for the property for far less than is owed on the 1st mortgage. and does the foreclosure create a lien on the property that has to be satisfied?
thank you again.
Hello Mark,
The first mortgage always has the primary lien on your property. In case of foreclosure or short sale, the first mortgage has the first claim and that has to be repaid first.
If the first mortgage is already going to foreclose then I don't think the lender will give his consent to quit claim the property to the second lender.
Even if the second lender sells the property at a lower price then the sale proceeds will first go to the first lender and the second lender will still suffer a loss.
I think it will be better if both the lenders meet and decide together what they should do.
But it is important for you to know that if the property is sold at a lower price than what you owe, then both the lenders might seek a deficiency judgment to recover the unpaid mortgage balance. Then you shall still remain responsible to make the payments for that.
The first mortgage always has the primary lien on your property. In case of foreclosure or short sale, the first mortgage has the first claim and that has to be repaid first.
If the first mortgage is already going to foreclose then I don't think the lender will give his consent to quit claim the property to the second lender.
Even if the second lender sells the property at a lower price then the sale proceeds will first go to the first lender and the second lender will still suffer a loss.
I think it will be better if both the lenders meet and decide together what they should do.
But it is important for you to know that if the property is sold at a lower price than what you owe, then both the lenders might seek a deficiency judgment to recover the unpaid mortgage balance. Then you shall still remain responsible to make the payments for that.
Generally, when a party forecloses on a security interest in real property, that party takes subject to all prior liens and all subsequent liens drop off.
The second mortgagor is trying to avoid losing his lien. If you deed the house to the second mortgagor, his lien gets absored by the deed, and he becomes owner of the property subject to the first mortgage, essentially stepping into your shoes.
If you are in a deficiency state, you are liable to both lenders for any deficit from the sale.
If you are in foreclosure on the first deed of trust, you will have a hard time finding a third party buyer. There is probably a Notice of Default recorded on your title.
The second mortgagor is trying to avoid losing his lien. If you deed the house to the second mortgagor, his lien gets absored by the deed, and he becomes owner of the property subject to the first mortgage, essentially stepping into your shoes.
If you are in a deficiency state, you are liable to both lenders for any deficit from the sale.
If you are in foreclosure on the first deed of trust, you will have a hard time finding a third party buyer. There is probably a Notice of Default recorded on your title.
Do not quit claim the property to the second mortgage holder. I haven't even heard of a lender asking for this. Is this a private mortgage holder on the second? You can handle the short sale yourself if you decide to go that route.