Sharon, Other/Just Looking in Dallas, TX

We just foreclosed as 1st...should we notify 2nd lien holders?

Asked by Sharon, Dallas, TX Sat Aug 9, 2008

The 2nd lien holder thinks they are in first position due to home owner signing an affidavit saying he had paid the 1st lien off. The 2nd did not bother to validate that statement which was false. The 2nd is now is pre-foreclosure however as 1st we already foreclosed.

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6
T.E. & Naima Sumner’s answer
Usually, I like what Bruce says, but I disagree with the notion of lying down and waiting for the home equity lender to file proceedings. You may win, eventually, but why pay for your lawyer to defend you at $300/hour? Head them off now with sufficient evidence that they can grasp that you own the property unencumbered.
The idea of getting insurance on the title is a good one in case there is a fight.
Web Reference: http://www.SumnerRealty.com
1 vote Thank Flag Link Mon Aug 11, 2008
Unfortunately, this is a legal question, which Realtors cannot advise you on. Your own attorney surely should know the situation and the law that applies. It is a surprise that the 2005 lender did not discover your second lien and ask for subordination. The home equity lender was probably not that interested in whether his position was first, because he assumed he was second.
Nasty business this. However, did the 2005 lender not find a record of your lien? If county records reflect the facts as you have stated them, you may want to advise the home equity lender of your current ownership to avoid having them show up and try to evict whoever is in there or file forcible detainer after they go through their foreclosure process. Avoiding embarrassment is part of it, but also you want to avoid having to fight them in court (which is expensive) over your ownership. Heading them off by giving them notice seems wise, but your attorney should advise you.
1 vote Thank Flag Link Sun Aug 10, 2008
Wow. Sounds like a real mess. I wouldn't let your original attorney get to far, you'll need him to join you in this fight, since he probably shares in any culpability that may exist. Best of luck getting this squared away! Would be great if you posted when it's over and let us all know how it turns out!
0 votes Thank Flag Link Wed Feb 27, 2013
Tough situation. Does your current attorney who is advising you also sell title insurance and are they willing to issue title insurance on the house in this situation? I'd think that would provide the telling answer. All this is pretty tough to prove I would think, so you may have a real fight on your hand if both you and the current note holder think you are in first position. If your current attorney does not have interest in a title company I would get them to refer you to one. I am not an attorney, so I would do or follow your attorney's advice, but I thought if you foreclosed, that you did have to notifiy the other note holders. We see some 2nd lien holders buying the 1sts at auction, so I'd think that's the best way for them to know is that they were notified that they have the potential to get wiped out. This is purely a guess. Does your mortgage show up on title searches? If it wasn't recorded then it is possible you are in second poisition. Good luck....sounds like a good learning experience.....let us know how it turns out.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Sun Aug 10, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Full story: 1991 buyer assumed note and we owner financed equity for $29K. In 2002 the buyer got a loan against the house and signed the false affidavit saying he had paid off the $29K. He got another loan in 2005 which paid off assumed note putting our $29K lien in first position. Then a home equity loan in 2006 that paid off his 2005 loan. Meanwhile he had continued to pay on our note until beginning of 2008 and at that time we started sending demand letters and the foreclosure process. We only learned of the false statement and other lien holder during this process because we got to looking at county records. We did use a lawyer to do the foreclosure and have the foreclosure sale deed. The lawyer said we were not requried to notify any junior lien holders. We are concerned that since they think they are in first position and in preforeclosure how would this impact the title if they go thru with the foreclosure process even though from what we know their interest in the property got wiped out with our foreclosure.
0 votes Thank Flag Link Sat Aug 9, 2008
This is fraud and the 2nd lien holder did not do their due dilegence. You may offer them a small amount and say sorry. That is if there is any money left over. However the second lein holder will initially go after the property. And you may have to prove the last owner lied to them and tell them to check your documents showing you are in first position and they may just go away. But may try and say you new about this and didn't disclose it to them. There could be some issues. They need to be informed of the fraud by the last owner and they should go directly after him. I would consult a attorney to know exactly where you stand. I would like to tell you forget about it but there may be something in the law that states even if they were lied to they still had title in your property. Pay the consultation fee and relax.
0 votes Thank Flag Link Sat Aug 9, 2008
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