Foreclosure in 77003>Question Details

David, Other/Just Looking in 77003

My home in Houston, Tx. was foreclosed and sold at auction. Does the second lien have to be paid off by the buyer also?

Asked by David, 77003 Sat Apr 10, 2010

Help the community by answering this question:

Answers

4
No if the first mortgage holder foreclosed the second has no rights against the buyer, who most likely was the foreclosing party (the first mortgage co). The second mortgage holder can now come after you, that note you signed was just that a note with the house as security, the house is no longer there as security but the note is still due and payable by you.
Good Luck and if we can be of any assistance please do not hesitate to ask.
Bob
1 vote Thank Flag Link Mon Apr 12, 2010
Hi David,

The answers provided are good ones. I just want to add that when the lender has the legal right to debt and their legal right is placed against the collateral in this case a property and they are "wiped" out at foreclosure auction. The lender would then remove their interest in the property and go after the borrower in order to collect. That debt is actually a commodity that can be sold. The creditor will attempt to collect from the party that owes the money and if they are unable to collect, the creditor will attempt to obtain a deficiency judgment and then that commodity is more valuable because a lien can be placed on the borrower's other property, garnish wages, etc. This is why bankruptcy is so common with foreclosure.
Now, the good news, if you or a friend owe money to a second lien holder, you can easily settle that debt for a lot less than is owed. Typically these folks will settle for 20% of the total debt owed or less. Make sure that you get the correct paperwork from the creditor. For example, you owe us $10k for the debt and we are settling this amount in full for $2k.

Good luck!

Hannah Fliegel
The Credit Repair Expert
415-999-9348
0 votes Thank Flag Link Sun Apr 11, 2010
Good Sunday Morning, David!
Before things progress further take the best step and talk with a tax attorney or tax accoutant....a professional. Waiting just gives you more time to worry. They will give you guidance about what you should do and then ....do it. In a few years you will want to buy a home and if you straighten things out now....then later you will be able to proceed without having to deal with past nightmares. No fun right now but later it gets worse. I can recommend some people if you would like. It is important you work with people you trust and follow their advice. Ask them questions they won't mind, but follow through. Call me if you'd like. Good Luck, Kathleen (281) 799-4002
0 votes Thank Flag Link Sun Apr 11, 2010
Disclaimer: The following is only an opinion, not legal or tax advice...

Generally all subordinate liens are "wiped out" by the foreclosure of a 1st lien holder (IRS liens are not subordinate liens); However, BOTH the 1st and 2nd lien holders may very well be entitled to ask the courts to grant a deficiency judgment against you in their favor. That is, if the foreclosure sale (auction) of the property did not produce enough funds to pay off your debt entirely (all principal balances + past due interest, late fees, attorneys' fees, etc), a judgment can be placed againt you. That's right, you'll still owe it and the debt will follow you until it is paid or settled by you or your heirs --Not a pretty picture and I'm afraid it gets even uglier.

Additionally, the IRS may decide that all amounts paid to you (the loans & associated debts) and not paid back by you, is now good ol' taxable income. In their narrow sight, you've just made money! Sadly, at a time when you may feel the poorest and have lost your home, the IRS just may want you to pay income taxes on that debt. My best advice is to seek professional help from a qualified tax accountant and/or attorney. Sooner is better. Best of luck to you!-- Real Estate Brenda
0 votes Thank Flag Link Sat Apr 10, 2010
Search Advice
Ask our community a question
Email me when…

Learn more

Home > Texas > Harris County > Houston > 77003 > Foreclosure in 77003 > Question
Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer