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Updated over 9 years ago on . Most recent reply
Dealing with 1st lien when buying second lien foreclosure
I was wondering if anyone has any hands on experience working with a bank to pay off the first lien on a property after they have bought a property at a foreclosure on a junior lien. There is a property worth about $300K that has a senior lien of $150,000 and the second mortgage is foreclosing for $45,000. In NC the only other liens I need to worry about at this point are IRS and property taxes. I will get a full title search done and talk to my attorney, but before I spend the money I'm wondering about the process of actually contacting the bank regarding the pay off of the first loan. Did you find the bank cooperative? Were you able to work it out? I'm not worried about having to pay the lien, just the mechanics of it. Any input from your experience is much appreciated!
Most Popular Reply
@Dion DePaoli Your input would be appreciated.
My experiences with payoffs to senior lenders have not been easy. Although CA Civil Code clearly provides for a successor in interest to make payoffs to senior lenders, the lenders in my cases did not cooperate. A couple of times I got authorizations to release info from the borrowers, which made all the difference. Not always easy or possible to do when buying at foreclosure sale. One time my escrow officer successfully used an after hours automated payoff request line. This was after she had made the normal demand for payoff request, accompanied by the deed showing I was was the new owner. The lender said they had to have an authorization from the borrower, which was not possible.
So while the law says the new owner must be given statements and payoff amounts, that doesn't mean they are automatically doing it. They have liability concerns on their end.
Your attorney can help, but you should IMO first make sure all proper notices were filed in the special proceedings file in the Durham courthouse. The first lienholder information should be in there. Also double check to make sure there isn't a substitute trustee filing against the first. If there is, check that file to see how much the demand letter says the payoff is. In my experience, it's best to engage your attorney to interface with the trustee(s). Also best to have an attorney who knows the trustees. If you want a referral, PM me. (Not sure my guy covers Durham, but I think they do. I know they don't handle foreclosures in Harnett county where I last explored a Brock& Scott foreclosure a few months ago. )
@Chris Martinis definitely the one who knows NC.
A couple of members I know of who have had juniors and had to deal with senior liens are @Dave Van Horn and
@Account Closed; maybe they can tell a bit about what they had happen.
@Dion DePaoli Your input would be appreciated.
My experiences with payoffs to senior lenders have not been easy. Although CA Civil Code clearly provides for a successor in interest to make payoffs to senior lenders, the lenders in my cases did not cooperate. A couple of times I got authorizations to release info from the borrowers, which made all the difference. Not always easy or possible to do when buying at foreclosure sale. One time my escrow officer successfully used an after hours automated payoff request line. This was after she had made the normal demand for payoff request, accompanied by the deed showing I was was the new owner. The lender said they had to have an authorization from the borrower, which was not possible.
So while the law says the new owner must be given statements and payoff amounts, that doesn't mean they are automatically doing it. They have liability concerns on their end.
@Chris Martin Thanks so much for your input. I didn't see any info in the file at all from the first lien holder, so I'm not sure what the status is with them. I'm going to call my attorney on Monday and see if he can give me any additional advice.
@Account Closed Awesome information, thank you! I admire your guts in buying the property, and then figuring out how to work out the first mortgage after the fact. Any idea what would be worst case scenario if it couldn't be paid off? Are we talking foreclosure on the first lien? Even then surely at that point they would be talking to me about a way to pay it off. I will take my chances if I know what I could be up against.
As I mentioned, successors in interest have legal rights to the payoff. IMO worst case scenario is spending legal dollars to get the lender to wake up. Could be as simple as letters from the attorney citing the laws. Could be as serious as filing suit in order to stop (or reverse) a foreclosure.
Regarding the first position lien holder, there most likely will be a NOTICE filing in Durham county records. In Wake county, the indexed document type is REQUEST NOTICE.
See also Requests for copies of notice in NC General Statutes.
There should be an affidavit (and 'green card') in the special proceedings file showing that notice was provided (assuming a NOTICE was filed by/for the first position lien holder) to the first position lien holder.
Regarding "In NC the only other liens I need to worry about at this point are IRS and property taxes" make sure there are no prior liens since they will survive this foreclosure. Some liens survive anyway. For instance, if the property is in a PUD with an HOA, liens are collectable and enforcable per 47A-22(c)... that section only applies to first positions. 47A-22. Liens for unpaid common expenses; recordation; priorities; foreclosure.
The above isn't legal advice. It's just simply state statute.
@Account Closed Great information - thank you both so much. I'll post back and let you know how it goes.