Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
Long story short. This is for the purposes of a foreclosure auction. 200K original first mortgage. in 2013, modification recorded indicating that principal was being reduced from 170 to 130K and a HUD partial claim was being added for 52K.
No additional recording of lien or anything by HUD but my understanding is just this clause in the modification creates a new lien of 52K on the house. So now basically a 130K lien and a 52K lien.
Now jump to 2019. First mortgage lender forecloses and goes to auction. Is the HUD partial lien considered a second mortgage (wiped out by FC) or is it somehow still part of the first mortgage and must be paid by auction buyer?
One really needs to see a title report and recorded instruments to answer questions like this accurately... but this sounds simple enough. I'd be quite surprised if there is truly no PPC 2nd recorded behind the modification. That said, if there is no recorded junior lien, there is nothing to wipe out; and, if there is a recorded junior lien, it will be extinguished.
Regarding the money... the first lender has already been paid the funds represented by the partial claim, so the foreclosing lender (not the auction purchaser) will be the one paying HUD.
