Mistakes with Foreclosure Case - Auction Buyer lose their money ?

[Robert E.]

Sorry in advance for the long post : )

I’ve been doing quite a lot of self-educating around foreclosures, including reading books on the subject and reading a lot of the great posts on this forum. I’m trying to get a better handle on where the foreclosure investor can get burned, i.e. lose money, as a result of mistakes made during the foreclosure case itself. I’ve got questions around 2 specific areas of the foreclosure case process:

Lien Holder Missed

1. When the law suit ‘lis pendens’ is filed by the foreclosing party, it’s my understanding that all lien holders are meant to be named in that filing as defendants by the foreclosing party. What happens in the following hypothetical scenario?

• The foreclosing party, omits naming one of the other lien holders as a defendant in the case when they file the foreclosure suit (assume that there is another lien holder just for example).
• Eventually Judgment of foreclosure is issued by the court, but the judgment does not list the lien holder that was omitted when the case was filed.
• The loan being foreclosed on is bought at Sheriff’s sale by foreclosure investor.
• 3 months later the lien holder that was omitted from the case, calls foreclosure investor and says, “you don’t own that property clear. We have a lien on it and we were never notified that it was being foreclosed on”

1. Who holds the burden of resolving this problem – who’s legally required to resolve the problem, is it the foreclosure investor, the foreclosing lender or the court system that issued the judgment of foreclosure?

1. Does the court system refund the foreclosure investor the money that the investor used to buy the foreclosed loan at the sheriff’s sale?

1. Is this a hypothetical scenario that just never actually happens in real life?

I appreciate that before the foreclosing party files the case, they’re going to run a title search. I’m more just trying to get a general understanding of.. if there are screw ups during the foreclosure case process, can the foreclosure investor get burned by these and ultimately lose some or all of their investment?

Homeowner not Notified

I’ve noticed in a lot of the foreclosure case documents that notification of the law suit gets mailed out to all defendants in the case, including the homeowner/borrower. I’ve also noticed that a response or acknowledgment from the homeowner seems like it’s never filed with the case, except for in cases where the homeowner is contesting the foreclosure.

Is there a minimal requirement that the foreclosing party has to meet when notifying the homeowner of the suit? For example does the foreclosing party have to file evidence with the court that they sent notification of the law suit to the homeowner’s address via certified USPS mail?

What I’m getting at is could the homeowner (or another lien holder or even HOA) maintain the following? “hey, I was never notified of this foreclosure case. The judgment isn’t valid’…. and could the homeowner undo the judgment of foreclosure based on that argument?

Thanks in advance! to anyone who takes the time to reply

Rob