Everyone is saying the second gets wiped out. Is that true for a refinanced sencond loan?

Asked by Royal1, Sacramento, CA Thu Apr 16, 2009

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Sue Archer R…, Agent, Palm Harbor, FL
Thu Apr 16, 2009
You asked this as a separate question as well.

Your alternatives are
* to short sale the house, and negotiate the lower amount that the lienholders will accept, with you possibly paying the difference,
* accept the possibility that the lenders will pursue you in court for the differences in a foreclosure, or
* file for bankruptcy, which MAY wipe out all subsequent liens against you.
In all cases, I would suggest you sit with an attorney to understand the options and how they affect you long term.

It sounds like your ex-husband is not understanding how those options will affect him as well. If I were you, I might offer to pay his consulting fee to have someone explain his options to him. I would think that he would want to select an option that would be least detrimental to himself financially, no matter what his feelings are for you. But he may need to obtain this information without feeling you are influencing the decision he would make.

Might that be the case? You can always have him read the blogs here on Trulia! :)
Web Reference:  http://www.suearcher.com
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Sue Archer R…, Agent, Palm Harbor, FL
Thu Apr 16, 2009
On a foreclosure, where the first is foreclosing, your second lienholder may have other avenues to pursue to obtain compensation for their loan repayment. In the case of a short sale, the first may often offer a small amount to the second lienholder. The first and second lienholders both agree to accept less than the original loan amount for certain conditions being met. At that point, the second would not be pursuing other avenues.

This is more of a question to answer for your specific situation with an attorney. I would recommend calling Stephen Beede at BPE law group in Fair Oaks. For $200 he will meet with you and explain all the details for your specific loan situation, and review your loan documents to define your rights and the rights of your lenders.

'Everyone' is correct that the second gets wiped out in terms of securing their loan against the property in a foreclosure. But it doesn't mean the second doesn't have other alternatives to pursue you for repayment.

This is a shortened explanation, but should emphasize another reason why a short sale is definitely better than a foreclosure on your home.
Web Reference:  http://www.suearcher.com
1 vote
David Turtur…, , 95826
Fri Apr 9, 2010
The second note holder is entitled to nothing.

-David Turturici, Attorney at Law / Broker
Web Reference:  http://visvires.net
0 votes
., , Los Angeles, CA
Tue Apr 28, 2009
Survey says : If Subordinate financing is purchase money then is it written down against the reported basis in the asset. Charged against the asset booked value or carry cost. If used to capitalize expenditures considered non capital items than its charged to income if written down by the creditor. The assumptions hindges on the second , its use and not enforcing its rights in a lender recovery.
0 votes
Royal1, Home Seller, Sacramento, CA
Thu Apr 16, 2009
I thank everyone for their answers. The reason I asked is because I'm in the process of a short sale. The second lender will not approve the short sale unless we pay 10% of the loan at escrow which is $6800 and the first will contribute $3000 of that, as well as sign a promissory note to pay the deficiency. The real estate agent negotiating for us said we should seek legal counsel. I did call a lawyer and all he said we that either way, short sale or foreclosure, we're responsible to repay the 2nd loan. He really wasn't helpful at all.

Since I'm on both notes with my ex-husband it has been hard as well, because now he doesn't want to do the short sale. Is there anyway I can go forward with the short sale if he doesn't want to quit claim the house to me?
0 votes
Mike Linkena…, Agent, Jacksonville, FL
Thu Apr 16, 2009
NO, that is not true at all. Sometimes the second position lienholder will ask that the deficiency is paid back by the borrower. The pretty much NEVER wipe it out completely, as they pretty much always recieve some type of payoff, usually between $1,000 and 10% of the loan balance. Thats if we are talking about a "Short Sale". In the case a foreclosure, laws vary from state to state. In Florida, ANY of the lienholders may seek a deficiency judgement against the borrower in a foreclosure proceeding.... We are a nationwide network of short sale specialist realtors
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blaison samu…, Agent, Santa Clara, CA
Thu Apr 16, 2009

Not all second loan wipes out just like that whether you do short sale or foreclosure. But, In short sale, at least you have a chance to negotiate with the lenders for not to follow for remaining balance or some kind of re-payment plans. Consult with a CPA or attorney for any tax ramifications. If you are planning to do short sale then list with an experienced agent who successfully closed any short sale transactions or at least have certification in short sale.

Blaison Samuel
Certified Short Sale Specialist
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