Secondary lien holder foreclosure

[Don Spafford]

Can a secondary lien holder start a foreclosure process? If I were to loan some money to use toward a down payment while a bank finances the rest, so I am a second or junior lien holder, would I be able to foreclose if I don't get paid? I'm pretty sure I've heard of this being done in some podcasts where somebody buys the second note, but I want to know for sure as I am considering lending some money to help someone with a down payment, but after speaking with the bank they would take it but I would be considered a second lien. So just in case I don't get paid I want to know what is my recourse. Thanks knowledegable BP members!

[Ron S.]

Yes...and they do it often. You are a private lender it sounds like so hopefully your note provides for remedy in the event of default. I would not recommend trying to foreclose on your own and would instead, refer your loan to an appropriate foreclosure trustee or attorney. Idaho does both judicial and non judicial foreclosures. You would need an attorney to file a lawsuit for a judicial foreclosure but hopefully (Again) your note provides for remedy under the power of sale clause typically found in most notes and deeds of trust.

Assuming the property is in Idaho: Idaho Code § § 45-1505 to 45-1515

My two cents is, don't lend money that you aren't prepared to lose. If they default and you in a position to foreclose, you would do so subject to the senior lien and if they need your money to close the deal, chances are there is not sufficient equity for you to lose both your money AND have the money to pay off the senior. That's an assumption on my part though. Maybe you are wealthy and have money to burn. If that's the case, have at it!