Why jr. Liens can be problematic when in 1st position

[Chris Seveney]

This was a great question. Somebody asked me yesterday. They asked, “why do you care about junior lies when you are in first position?“

There are several reasons why this is important:

1. It typically takes away your exit strategy of a deed in lieu of foreclosure

2. If there is little to no equity, the borrower may not be able to sell the property on the open market because it would require cash at closing.

3. Second position lienholder have done some shady stuff in order to delay a loss, including filing suit against all parties or trying to obtain a temporary restraining order.

I have had every one of the above come into play, which has caused the timing of exiting the asset to take longer than anticipated. As you know, time is money in this business.

So if someone tells you, it does not matter about liens behind you - it does.