Essentially, what you're doing is offering lumps of cash to the note holder (the guy who's getting paid) so that you are assigned an income stream (payment stream, typically on a monthly basis).Once you do your DD and pay the note seller, an assignment takes place and the note payor is now informed that he or she has to make payments to you, the new note holder.

Any lien holder can foreclose if the deed of trust (mortgage in some states) lists a default action and an occurance of that default action has occured.

If you default on your first mortgage, for exsample, the first lien holder may be entitled to receive those rents from the date of default.

Being a note holder on an upside down property where the owner is not paying is not a nice place to be.

You can buy it, but you will need to pay for the contract outside of closing, the lender will not finance the contact, unless the contract holder gets paid as a third party payout.

I wanted to get a 80% mortgage with a bank and keep the remainder of the principal as a loan with the private mortgage holder.

If nothing else that is a buy and holder.

I guess if the tax lien holder was able to successfully petition the court to initiate the foreclosure then it IS valid?

The note holder should have all of the settlement documents.Make sure the liens were filed in proper order and recorded.

Now these same investors want the sellers to also hold back a 10 percent second to be at a 80 ltv with the lender.The problem is used to if the seller held say a 10 second at 100k they could immediately sell off for 50k after closing.Now no note holder companies have bought a second position in over a year.