Bidding on Second Mortgage at Auction in 2 days, big questions

[Jose T.]

I'm interested in bidding for a home at auction. There are two mortgages on the same property going to auction within 3 weeks of each other. The first mortgage that is going to auction is a secondary mortgage. If I bid on that one and win does that give me the right to pay off the primary mortgage before it goes to auction. I also wanted to know if by winning the second mortgage the rights to redemption on the first mortgage are stripped from the original owner and passed on to me?

I want to make sure that if I win the auction on the second mortgage:
1. I can pay of the first before it goes to auction.
2. The original owner cannot simply pay off the 1st mortgage and take the house back.

Thanks.

[James Mikel]

Here is a scenario that fits. If you obtain the certificate of title derived from that interest of a second mortgage holder the first mortgage will be superior. Therefore, you will be responsible for payment. Though, if there is overage from the sale they can claim it if they are first in priority. So, you after obtaining the cert of title can indeed go and negotiate with the first mort holder for the release of that mortgage but do not expect a huge reduction. Also make a query of the county official records to find any additional liens which may be superior i.e. county, state,fed. These liens will have a higher priority than that of the mort holder though there had been challenges made recently as to the first in time/first in priority common law being in confliction with current USC code.

Anyways, in Florida here is a 10 day period of objection after the auction occurs, but it is a formality for the mortgage holder to object to the sale, mostly. I have not seen a cert of title overturned by the owner during that window but have seen a case where the attorney representing the lender failed to show up at the auction to set the openinng bid and the property went for peanuts. That one was over turned.

All rights of redemption end upon closing of that 10 day window in regards to the interest at stake.

As for your first mort holder. It is unlikely that the auction will move forward if you approach with the capacity to pay it off or to negotiate the satisfaction thereof. Once the 1st is removed, the house is yours by virtue of the interest you hold in the property. With the satisfaction of the first, the interest derived by virtue of the certificate of title gives you right to possess and clear title to the property--if there are no other encumbrance holders.

In my opinion, yes the owner can sweep in and pay off the first most-let him. The first is satisfied your interest is superior to his, take possession.

This is only my mere opinion and added 2 cents for the day, I know nothing as I am not an attorney.

You can read a great deal more about this on my site.

FYI-See Title 28 for info info on release of IRS liens on auction property.

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