Foreclosure in 49546>Question Details

Elizabeth, Other/Just Looking in 48301

Can a second position mortgage remerge if we cash in retirement money to buy our house back at the auction? We have filed a Chapter 7.

Asked by Elizabeth, 48301 Thu Oct 14, 2010

We have a home equity loan that somehow ended up in first place at the court house. This must have been a big mistake by the title company. Then our mortgage which is by far our bigger home loan is in second position. Anyway, while waiting for a modification on our second (our larger loan) our home equity matured and they would no longer take payments. They wanted 125,000. or nothing. Apparently they knew (we still did not know then) that they would recoup all of the money owed because they were in first place as far as the liens went.
We were told that Chapter 7 would prevent the second position bank from sueing us for a deficiency judgement. We had been current on all our bills except we had stopped paying the home equity loan that would no longer take payments because the loan had matured. Our home was scheduled for a sheriff sale for the amount of 125,000. Again the larger loan is 360,000, My question is following the bankruptcy judgement, can we remove the 125,000 from our modes

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0 votes Thank Flag Link Thu Sep 26, 2013
Sounds like perhaps you refinanced your larger mortgage after you took out the HELOC and the second moved into first position because their lien was recorded before the deed of trust was recorded for the refinanced mortgage and nobody asked the HELOC lender to subordinate. You just assumed that the first will remain in the first position. Is that maybe what happened? What debts were discharged through your chapter 7 BK is a question for the attorney who handled your BK case. Was the lender that you thought was in first place listed as a creditor in your BK petition? I don't quite understand why the house would be sold for only $125,000. I understand that's what is owed to the HELOC and all they care about is recouping that money, but that does not mean that they can sell a house that may be worth a lot more for the bare minimum. It would be a good question for a lawyer. I would argue that they have a duty to get as much as possible and give the overage to the holder of the junior lien and mitigate damages for everybody. Just my humble opinion. You surely have a unique situation and it would be interesting to hear what happened.
0 votes Thank Flag Link Tue Dec 21, 2010
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
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You should investigate more if you have the energy to see why the home equity came in first. Are you sure it was a mistake by the title company? Usually the mortgage is the first lien. Not sure where the novation came from.
0 votes Thank Flag Link Fri Oct 15, 2010
The second which should be the first will be there to protect their interest, so you will need to being more than 483K to the table. Are you in a position to do that?
0 votes Thank Flag Link Thu Oct 14, 2010
Again these are question for an attorney. I do Know that Sun Law in Grand Rapids,MI specializes in this type Business. I would contact them to get the answers you seek.
Web Reference: http://www.sunlawgroup.com
0 votes Thank Flag Link Thu Oct 14, 2010
Elizabeth, that is a question for your bankruptcy attorney, unfortanately it is hard to make an opinion without knowing if Michigan law is different than here in NH. if you filed pro se, without an attorney, it may be worth the first free meeting with an attorney for you to get some direction here. It is worth the time as it appears yout title is a mess. you may also want to contact teh attorney that closed your 1st or 2nd mortgage to find out why they are in poss 1 instead of poss 2.

good luck working things ouot
0 votes Thank Flag Link Thu Oct 14, 2010
You are going to get a lot of answers telling you to contact a bankruptcy attorney. Most everyone on this site are Realtors and Mortgage Professionals and will not be able to advice you on this for legal reasons.

I can say that although rare, a second mortgage company will jump first place during chapter 7 and come after your assets. Strange that the court let you keep your retirement assets on a chapter 7.

The second mortgage company may pursue putting a lien on your cash home if they didn't agree to be included in the bk7 as can other creditors.

My next question is, why on earth would you pull money out of retirement to buy a house when a house does not create wealth. The equity in the house would be earning zero percent interest whereas I'm sure your retirement vehicle is earning more than that. Do you believe that an auction house will double in value in the next 5 years and quadruple in 10?

Instead, I'd recommend you rent or lease purchase for 3 years for foreclosure and bk wait time and rebuild your credit (get secured credit cards) and then buy with little down. KEEP YOUR MONEY IN YOUR RETIREMENT PLAN. Don't end up broke and old having to resort to a reverse mortgage when your 70. Leave something for your family.

In the meantime contact your bk attorney for advise about what the second company's rights.
0 votes Thank Flag Link Thu Oct 14, 2010
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