Can a secondary lein holder (second loan held by Bank of America) foreclose?

Asked by bradss701, Oakland, CA Thu Sep 20, 2012

In an attempt to short sell a condo unit, the main loan was sold to another bank. The new bank offered a re-structured loan with great terms. The second loan is still held by Bank of America. What do I do?

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The Medford…, Agent, Fremont, CA
Thu Sep 20, 2012
You are going to have to get the new first lien holder to work with Bank of America towards a successful short sale. BofA in the second position will not foreclose because then they will typically get nothing. It’s in their best interest to work with the first towards a satisfactory short sale. Because the first note has been sold it may take longer to complete the short sale, but it can be done. Happens all the time.
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Flag Thu Sep 20, 2012
Taylor Suble…, Agent, Oakland, CA
Thu Sep 20, 2012
Short answer: No.

If the second, or junior, lien holder tries to foreclose, the primary lien holder will find out when the Notice of Default is filed and public. The primary lien holder will then start their own foreclosure proceedings in order to head off any efforts by the secondary lien holder.

So, technically a second lien holder can foreclose, but a primary lien holder won't let it happen.
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Ruth and Per…, Agent, Los Gatos, CA
Wed Sep 26, 2012
Of course they can, and if you had a third lien or a fourth they all can.

Do a short sale.

Good luck.

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John Juarez, Agent, Fremont, CA
Wed Sep 26, 2012
The 2nd lien holder certainly can foreclose. If they do so, they would take the property subject to the claims of the senior lien holder. As long as payments are current on the 1st, the 2nd lender would become the owner of the property.

If the 1st is underwater, the 2nd holder would receive nothing by foreclosing. If only the 2nd is underwater, the 1st would be paid off in a foreclosure.

If the 1st refinances your loan, the new deed will no longer be in 1st place. Unless there is enough equity to allow a new loan to pay off both loans (it looks like there is not since you mentioned short sale), the new lender would have to convince the 2nd lender to subordinate their loan to a new loan.
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Pacita Dimac…, Agent, Oakland, CA
Thu Sep 20, 2012
What do you want to do, and what can you do?

When you said a "restructured loan with great terms"....does that entice you enough to stick it out and can you afford it?

Can you refinance into one manageable loan?

Can you afford to stay?

Are you in contract?

If the reasons for your hardship are unchanged and you still need to do a short sale, then the process will be the same --- get short sale approvals from both lien holders, with the second not having much of a choice but to play along or get nothing
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Ron Thomas, Agent, Fresno, CA
Thu Sep 20, 2012
The only thing harder to do, than a Shortsale; is a Shortsale with a 2nd!

You may look back on this and wish that you had walked away:
This is not a good fight. You will be sorry.

Maybe, (if you are determined to bull ahead), you should, as part of the OFFER, to offer $2,000 which is earmarked for BofA for the 2nd.

Are you sure that the Homeowner is COMMITTED to do this?
In addition to everything else, you may have to wait 6 months to hear anything.

Good luck and may God bless
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