Khalil, Home Buyer in New York, NY

There are 2 mortgages on home to be foreclosed.

Asked by Khalil, New York, NY Mon Oct 15, 2007

There is a home for sale at a foreclosure auction in NYC. There are 2 mortgages on the home- senior (1st in time; older) & junior ( 2nd in time; recent). However, the junior bank recorded its mortgage before the senior bank. The senior bank is foreclosing the property. Will the junior have interest in home after the sale since he recorded his mortgage first?

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4
Ruthless, , 60558
Sun Oct 21, 2007
Many lenders will require their position be stated these days. In the old days, the first to file made it the senior mortgage. However, when people started getting piggy back loans where they buy a house with two loans, one for 80% and the other for 20%, the documents clearly states that the 80% is the senior loan even if the junior loan file first. With all the refinancing over the years, new lenders might require that and old lender agrees to subordinate their loan. This is why buying foreclosures at auction can be so tricky. You need to have a detailed title search done and all of the document read to find out what agreements were made.

Ruth
0 votes
Joseph Ferra…, , New York County, NY
Sun Oct 21, 2007
The lien attaches when the property transfer is made-- so senior is first in line to be paid.
0 votes
Richard M. J…, , Sherman Oaks, CA
Tue Oct 16, 2007
Hi Khalil, Thats funny as I thought the first would be recorded first. You might want to discuss this issue with a real estate attorney.
0 votes
Ruthless, , 60558
Mon Oct 15, 2007
Each state is different, however, I believe they all work along these lines. The Jr holder will claim the interest in the home away from the homeowner but not the Sr loan holder. The Jr holder would then need to buy out the Sr holder either before or at the foreclosure in order not to lose their interest in the property. A Jr cannot wipe out a Sr loan but a Sr foreclosure can wipe out a Jr holder. Now if the homeowner didn't pay the IRS, they take precedence over the mortgage companies. All of this is why you should be extremely cautious about buying a foreclosure.
Ruth
0 votes
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