Foreclosing from the 2nd Position?

[Chris Serger]

I'm new to notes, have read/listened a bunch and attended Martin Saenz's workshop. I'm still not clear what's required of the investor in the event you have to foreclose (though that is not what my goal in this business is). Let's use this scenario:

• Ohio property - $90K FMV/appraisal (for sake of this example)
• Senior/1st Lien - $50K
• Junior/2nd Lien - $25K (this is what I'm buying)
• Total Equity - $15K ($100K - $50K - $25K)

The borrower isn't willing to work out a loan modification so I foreclose. The property goes to auction and bids start at $60K (Ohio law is 2/3 of appraisal). I don't want the property and I don't want to be on the hook for $60K. I just want to be made whole on the $25K value of my 2nd position note. 

How does this work? Thank you in advance.