2nd lienholder foreclosed and evict

[Ti Hon]

would it possible for the second lienholder foreclosed and evict the homeowner eventhough the homeowner still current on the first?

[Jon Holdman]

I'm not sure that's the way it works, Eddie. The second lienholder has a security interest in the property, and that gives them the right to foreclose, take possession, and yes, evict the owner. You are correct that the first mortgage holder, as well as any other senior liens, remain in place. Those do become the responsibility of the auction winner or the foreclosing bank.

Now, if the property is worth $100K, and there's a first for $120K and a second for $30K, then second isn't even worth a dollar. Someone would be foolish to bid even one dollar, since they would be stuck paying off a $120K first.

But if the first is $50K, and second is $50K, then someone might win the second for, say, $25K. Its my understanding that the second lienholder would pocket the $25K and the winner would get a deed. Public Trustee Deed, here in CO. The foreclosure would wipe out any junior liens, assuming they don't redeem. Any senior liens, including the first, would remain in place.

The due on sale clause of the first would be triggered, giving the first lienholder the right to call the note (i.e., foreclose), even if it had previously been current. But the auction winner does own the property. For the right price on the second, the winner could simply pay off the first and have a good deal.