Francis, Home Buyer in Buffalo, NY

Follow-up to 'Are 2nd mortgages wiped out at auction?'...

Asked by Francis, Buffalo, NY Sat Apr 12, 2008

Thank you Jim and David for your answers regarding the status of 2nd mortgages at auctions. Your answers lead me to a follow up question. Jim said that 2nd mortgages are wiped out at auction (as long they were recorded after the 1st). David said that in cases where the 2nd lein holder believes there will be money left over, they will generally foreclose as well to preserve their right to any remaining equity in the home. This is exactly the situation I am looking at. The home is worth substantially more than the amount of the 1st mortgage, but less than the sum of both mortgaes together. If junior lien holders are in fact wiped out at auction, how would the holder of the 2nd mortgage tap into the remaining equity? Additionally, assuming the 2nd mortgage is wiped out, would the holder of the 1st mortgage price the subsequent REO at market (and in this case, make a substantial profit), or only high enough to cover the delinquent 1st mortgage plus incurred expenenses? Thanks again.

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