All Forum Posts by: Michael Morrongiello

Technically the 2nd lien slid into FIRST Lien position when the superior 1st lien got paid off and released. However I agree with the Motion for summary judgment surrounding the QUIET TITLE action affirmed its likely NOT a collectable debt and YES we are getting a more firm legal opinion on that... 

Appreciate the insights....and caution 

Situation: 
Year 2007 - Looking at a VERY old at the time 2nd lien Mortgage on a residential property in Illinois.
The 2nd lien Mortgage & Note was made back in 2007 by the lender on this investment property many years ago and sat behind a BIGGER Wells Fargo 1st lien. The property was SOLD to a BUYER "subject to" both loans a few years later 

Year 2000- That 2nd lien ENTITY that HELD the mortgage and Note was involuntary dissolved in 2000 and they did not REINSTATE the entity.

PROBLEM:
Year 2014- The 2nd lien Note  was never paid and the lender did not take any actions to enforce their rights for many years.
The Wells Fargo 1st lien eventually PAID OFF IN FULL (thereby sliding the non collected 2nd Mortgage lien into a PRIORITY lien Position)
in 2014 the property was purchased and was transferred again. That buyer continued to IGNORE the 2nd lien and did not make any payments on it. 

Year 2020 a Formal Attorney generated DEMAND letter was sent by the holder or the 2nd lien Mortgage & Note which had now GROWN to a much larger Balance (sum) due TO the property owner making a demand for payment.  

Also at this time in 2020 the property owners filed a Complaint and brought a QUIET TITLE Action Motion for Summary Judgment against the 1st lien Mortgage Note holder (remember originally was a Subordinate 2nd lien that then slid into 1st lien position when the 1st lien was paid off in full around 2014). Their arguments were # 1  that a NON EXISTING ENTITY cannot bring a collection action and # 2 well over 20 years of time had gone by with no attempts to collect on the Debt owed to the Mortgage and Note holder.  

Year 2020 later on in the year; The Court Granted a SUMMARY JUDGEMENT over their compliant filed to Quiet Title BY the property owner against the defendant (the 2nd lien Mortgage Holder who had become a 1st lien) 

2025 TODAY - now this former 2nd lien Mortgage & Note holder (who slid into 1st lien position) wishes to SELL their Mortgage and Note position for a STEEP Discount. 

QUESTION:
Would you advance cash to them to purchase their alleged 1st lien Mortgage and Note and touch this
in an attempt to collect on it or not and WHY ?

Property is located in the Sunshine State - Florida 

Situation:
Husband and wife bought a NEW home in 2017 for $380K and put down $90K, then obtaining a $290K CONVENTIONAL 30 Year Fixed interest rate 1st lien @ 4.0%. The payments on this 1st lien are $1,384.50 P & I only. The Husband is a realtor and wife works on occasion. This is their primary residence and the value increased quite a bit since 2017 to where conservative value of the home today is in the $625K to $650K value range. The real estate markets slowed in 2024 and the husband reached out to an investor associate to BORROW some funds during these slow times. The investor associate who KNEW them and had done past business with them agreed to LEND them $27K as a 2nd lien mortgage note against their home with I/O terms and a balloon due in 12 months. The closing was done thru an attorney. NO income qualifying was done between the parties as the knew one another and had done past business with one another.

PROBLEM; 
When the 12 months maturity date came due in 2025 the borrowers COULD NOT pay off the $27K 2nd lien So the Investor lender agreed to FULLY AMORTIZE out the $27K over a 60 month (5 year) period of time with monthly installments. They have slowed paid some of these payments and then caught them up. The 2nd lien balance is now $24, 000 +/- and The 2nd lien Note holder wants to move on from this loan and not have to deal with them any longer. With its almost 8 yrs of payments paid on it thus far; The approximate superior 1st lien balance outstanding is $243,000

QUESTION: 
Given that that this 2nd lien loan was closed thru an attorney and the parties knew one another, and it appears there is SUFFICIENT 
equity cushion between what they owe on their 1st lien ($243K) and their 2nd lien ($24K) Vs the $625K to $650K  Now  Property Value.
WOULD YOU BUY THIS 2nd lien ? 

Would you have any concerns that this might be construed as a consumer loan since its an owner occupied residence and was so when the investor LOANED them the 2nd lien funds?

Would then cause you to pass on the purchase even at a DECENT discount of THIS 2nd lien Mortgage & Note?

Thoughts? 

Michael M. 

All Good Points and well taken... Yes wholesale fees paid out or POC- paid outside closing 
are typically NOT part of the property purchase price and Owners Title Insurance Policy being issued to the property  buyer /insured. Not sure IF all title insurers will issue a policy in EXCESS of the purchase price to cover the extra padding (wholesale fee) 

I was looking for a way (out of the box thoughts) 
to possibly FORCE this original Lot owners hand to 
SELL the lot back to our friend or thwart him from selling the lot to anyone else.

Some thoughts;
Acquiring any future past due HOA Dues from the HOA
 (then bringing action to foreclose on them)?

Filing a Lis Pendens to cloud title (Lawyer Latin for "Suit pending")  of the  lot ?

OR could some other way a lien could be placed against the lot property 
That could bring the now rightful owner (who took back title) back to the negotiating table ?

Ken
Few Attorneys will be willing to take on a Title Company and their army of litigators.

PLUS its clear that the owners Title Insurance policy purchased ONLY by our friend insured was was conveyed and purchased (albeit fraudulently); AND that was only the Land Lot. 
The insurance willingly PAID on that claim. 

Trying to think outside the box here 

A friend bought a land lot in an area where this is a HOA - Home Owners Association for $100K from a land Flipper and DID obtained an OWNERS TITLE insurance policy. The HOA Dues were in arrears for the lot as they were not being paid.
He then started construction on a new home on the lot and has invested about $200K+ into the lot in the way of improvements. 

He received a call and correspondence from an individual who RIGHTFULLY claimed they had their title to the SAME land lot stolen from them by the land Flipper (who apparently fraudulently forged signatures transferring the land to them) and THEN SOLD it our friend.

Our friend file a claim with the TITLE Insurer who provided the OWNERS TITLE INSURANCE Policy to them for the $100K 
purchase of the land lot. The Title Insurer has agreed to PAY HIM back the $100K that was for the purchase of the land lot BUT 
they WILL NOT pay anything more (ignoring the improvements made to the lot). TAKE NOTE HERE !!! - ALL the Title Insurer will pay back to our friend is their purchase price for the Lot. 

The RIGHTFUL owner (who will get back his lot- now IMPROVED and valued > $300K+) is also now unwilling to sell the lot to him.
Thus He will LOSE this land lot and also now the $200K of additional improvements made to the land lot.

Any suggestions or courses of action or recourse that our friend might or could take to somehow RE-Obtain the land lot (now improved) ???

Eg. Can he possibly pay some of the HOA Dues and then bring an action against the ACTUAL legal owner of the lot in an attempt to FORCE them to SELL the lot to them? 

Other thoughts....

Michael Morrongiello - Sunvest 

Jack - I strongly urge you to attend some of the respected REIA - Real Estate Investor Associations in your area. NOTE all Meetups are educationally driven, many of them are attempting to sell you something? (a course, book, system, or entice you to invest, etc.)
Best to LEARN from those in the Trenches doing deals and who have ups and downs experiences. A good group in the SF Bay area that has been around for a LONG TIME 25+ years holding monthly meetings and that provides high level education, discussion and networking opportunities for both beginning and seasoned RE investors is BAWB - check them out if you can Bay Area Wealth Builders Association 

Chris
That is EXACTLY what is taking place. New Corrective documents (Mortgage Vs Deed of Trust) and a Corrective Promissory Note will be executed to CORRECT and REMEDY the flawed documents used. 

Moral of the story; many folks use online forms, or store bought documents which they often do not fully understand to save some $$ Moolah - only to create BIG Problems for themselves and others. 

Old Saying; "Don't be Penny Wise and POUND Foolish.." 

Agreed; While both are used; the more customary security instrument used is a Mortgage Vs a Deed of Trust to secured a promissory Note. Good Advice indeed - Thanks