Can you assume 1st mortgage if buying property at auction (in California)?

[Monica Boyles]

Hi all. I've been looking at properties going to auction. Typically it's the lender of the first mortgage that is foreclosing. But occasionally I'll see a property where the it's the lender related to a second mortgage (or even an HOA) that is foreclosing.

My understanding is that (here in CA at least) if you buy a property at auction and it's the lender of the first mortgage foreclosing, a second mortgage is wiped and you won't owe that. (There might be other property liens that remain of course.)

It's also my understanding that if the lender of a second mortgage is foreclosing and you buy the property, you'll still be responsible for the first mortgage. My question is whether you can assume this mortgage under the same terms (or potentially new terms), or whether that 1st mortgage is going to have to be paid in full ASAP. Please let me know if you have any insight.

[Wayne Brooks]

Quote from @Ti Hon:

thanks for the insight Chris and Jay !

regards to the senior liens, for my own clarification, even though the borrower is still current, the senior lenders still be able to foreclose ?

I have dealt with banks on other issues before and it never seem to me that is an easy thing to do .. how difficult would it be to work with senior lenders to pay off while the current borrower still making payments ? .. my take would be since bank is getting their payments thus there is no incentive for them to either sell the note or foreclose the property.

let's assume now I pay off all the senior lenders .. I now own the senior notes .. for my own clarification, even though the borrower is still current, I would still be able to foreclose on the property ? 

I see some of the junior liens being auctioned at trustee sale in CA are not much .. some in the 20k - 30k range .. and CLTV is also quite low, less than 60% .. what would be my risks ?

If you buy the property at the second mtg foreclosure….You own the property, the borrower no longer owns the property. You will Not be buying the first mtg when you pay it off. You own the property, there is no one to foreclose on at that point.