Investor · Cupertino, CA · Member since 2016 · 83 posts · 9 votes
Hi I am looking for some advice here . I am a private lender and I do some private lending through my IRA funds . I loaned funds from my Roth IRA account to a real estate investor for 2 properties ( two separate 2nd liens loans ) in florida. Both the loans are in default as they have not been paid back after loan term was due .
Both properties have 1st lien from another private investor and both properties will have equity after paying back both 1st and 2nd liens. I have tried to reach the investor to look for options to pay back the loans but it seem that he does not have any concrete plans to pay off the loans at the earliest.
What options I have to recover the amount due on the loan? Can I foreclose the property to recover the loan amount ? Do you have any recommendation of any law firms I can reach out who can assist me on this . Please share your thoughts.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
YOu can foreclose your lien. You will own the property after the foreclosure, but with the first still in place. You will owe the first lien. If I were you, I would get started with the foreclosure as quick as possible. This will not only push the borrower to get moving, it will prevent the 1st lien to foreclose first and wipe you out completely.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
Hey @Lisa Eckman I am not familiar with Florida law or if that is the case there in Florida. BUT it was mentioned that there was equity to pay both loans back and then some. If it is the case as you mentioned it, the 2nd will get paid anyway.
I believe the question was to recover the amount due on the loan. Foreclosing in this situation is definitely the thing to do. The borrower, in any state, CAN file bankruptcy which causes lots more problems for the lien holders. Communication is always key in these situations.
Investor · Cupertino, CA · Member since 2016 · 83 posts · 9 votes
6y
Thanks for your response. I have couple of more questions . As the money lend from Roth IRA account do we need to pay all legal fee also through Roth IRA account or we can pay the lawyer through personal funds . I heard that HUD foreclosure and evictions are not allowed till April end . Does it also mean properties funded through private lending also can be foreclosed till April end ?
Do you have any reference or recommendation for any law firm which can handle foreclosure request in this case ? If yes please let me know.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
@Lisa Eckman No. I don’t know about other states but the 1st mtg stays in place with a 2nd lien foreclosure and the first gets no proceeds from the sale.
@Sameer Jain The city/county would be helpful in looking for foreclosure attorney recommendations.
@Wayne Brooks I think your answer is misleading. I say that after reading the post in BP, that you also participated at in. For those interested, search for “Foreclosure from a second position” for more details. They may not get proceeds, but that doesn’t negate their position or options. The person who purchases after foreclosing in the 2nd will inherit the 1st position loan.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
@Lisa Eckman Yes, that’s what I meant by “the first mtg stays in place”. It is unaffected, the first mtg will foreclose if not paid. And I agree, I've seen many people buy at an HOA auction, which is also junior to the first mtg....they inherit the debt since it remains attached to the property.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
6y
@Sameer Jain You as the foreclosing 2 nd mtg get all proceeds from the auction....up to your judgment amount. If the property sells for more than that, which is rare for a 2nd mtg foreclosure, any excess proceeds/surplus go to any junior lien holders, then the owner. The first mtg gets no proceeds whatsoever.
Thanks for clarifying. It was the way I read the first response, which seemed to infer that the 1st was out of the picture. Not true as you've clarified above. Thanks!
Thanks for your response. I have couple of more questions . As the money lend from Roth IRA account do we need to pay all legal fee also through Roth IRA account or we can pay the lawyer through personal funds . I heard that HUD foreclosure and evictions are not allowed till April end . Does it also mean properties funded through private lending also can be foreclosed till April end ?
Do you have any reference or recommendation for any law firm which can handle foreclosure request in this case ? If yes please let me know.
Unfortunately, and from what I understand, yes you need to pay all legal and associated fees in the foreclosure through your IRA account.
From what I've seen to date, foreclosure moratoriums are on a state by state and sometimes county basis. You could likely google to find out if applicable for yours. If you want a good foreclosure lawyer , PM me and I can give you mine. However I believe she is in quarantine currently due to being immunocompromised.
As for the other questions, Wayne Brooks provided the correct info.
Lender · Salt Lake City, UT · Member since 2019 · 23 posts · 8 votes
6y
@Sameer Jain Is there a particular reason why the borrower can't obtain new financing to payoff the 1st and 2nd liens? Or possibly just the junior lien (depending on the IC agreement). For a lot of my lenders, they'll start the foreclosure process asap, but to save on time and costs associated with foreclosing, find the borrower some loan options to get paid off asap. Hope all works out for you!