Foreclosure in Dallas>Question Details

Bart, Other/Just Looking in Dallas, TX

can my second lien holder foreclose on my home loan if my first lien is current?

Asked by Bart, Dallas, TX Wed Jul 2, 2008

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does anyone look to see how old these link questions are? this is July of 2008
2 votes Thank Flag Link Tue Mar 2, 2010
My buyer is dealing with this now....second is not happy with the funds, so they are forcing an auction!!!!! Go figure
Flag Tue Jun 9, 2015
Yes and in the Dallas area we are seeing more lenders do this. I've also seen lately second lienholders buy the 1st lien at the foreclosure auction to protect their investment. It may have happened in the past but I never noticed until recently. Makes sense though. If someone had an 80/20 on a 200,000 house. That might mean the 20 was $40,000, so if the owner of the $40,000 note thinks they can sell the house for $190,000 now, they might be able to recover some of their investment.
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2 votes Thank Flag Link Wed Jul 2, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
A junior lienholder can foreclose, but the property would be subject to all superior liens. Tax liens, for example, are always superior. So, when a first lienholder forecloses, he gets the property subject to any tax liens.
If a second mortgagee foreclosed for non-payment, he would own the property with the first lien still in place and have to pay it plus the taxes.
Of course as a practical matter, the second lienholder may not want the property, especially in this market. So, he would try very hard to get the mortgagor (you) to pay up before taking the drastic step of foreclosure.
The foreclosure might also trigger acceleration of your first lien note, though, making the whole balance due. You would have to read the note for the first lien to see what consequences there might be.
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2 votes Thank Flag Link Wed Jul 2, 2008
You bet.
Of course the first lein holder still maintains its position. That is if the 2nd LH forecloses you out and selle its interest, the buyer would be purchasing subject to the second lien. Not a good position to be in, these days, but it does not change the fact that you have lost your equity position and your home.
1 vote Thank Flag Link Wed Mar 3, 2010
A foreclosure will wipe out all junior lienholders. This means a first mortagee who forecloses gets it without the second mortgage in place and eliminates all the mechanic's liens and other claims against the property, except, of course, taxes. Tax liens are always superior.
A peculiarity of Homeowner Associations (HOAs) is that their lien is actually superior to the first mortgage. When you don't pay your HOA dues, a foreclosure by them should wipe out your mortgage, but it doesn't.
The reason is the CCRs by the builder creating the HOA are filed prior to the sale to the first homeowner. This makes their lien superior, but the CCRs almost always include a subordination clause. A bank wouldn't lend money to buy a house with a HOA if the HOA could foreclose and wipe out their lien. So, the subordination clause says that a first lien mortgage is superior to the HOA's subordinate liens.
This always causes consternation among HOA officials because they often think they can get your property free of liens. They can't unless there was an oversight in the CCRs (HOA covenants, conditions, restrictions) that did not subordinate HOA liens to first mortgage liens.
This means your HOA, if any, can foreclose for non-payment, but receive the property subject to first mortgage and tax liens. When the first mortgagee forecloses, the HOA lien is wiped out.
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1 vote Thank Flag Link Sat Jul 5, 2008
Yes but usually we see it the other way around. The first lien forecloses and that is when the second finds out. Usually the 2nd ends up with nothing in a foreclosure, so to protect their interest we are seeing more of them buy the property at the foreclosure auction.
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1 vote Thank Flag Link Sat Jul 5, 2008
In pa is the second lien holder able to take your home if the first is current
0 votes Thank Flag Link Wed Aug 17, 2016
Hi Bart

If you are current on your first mortgage and become delinquent on your home equity loan (which is a form of second mortgage), the second mortgage lender has the legal right to foreclose on your house and property.To know more search…………
0 votes Thank Flag Link Tue Oct 8, 2013
Would any of your answers be different if the 1st and 2nd lienholder is the same bank?
0 votes Thank Flag Link Fri May 31, 2013
Yes, and today we are starting to see this happen strategically as it can really benefit the second in some cases.
0 votes Thank Flag Link Sun Jan 16, 2011
Here is fresh one for you. I’m in Houston and this popped right up when I searched on the subject.

I went through a loan modification d was able to save the 1’st and & got a great new deal with Wells Fargo. But just about all the equity was wiped out (didn’t pay the mortgage for a long while).

My home is appraised for $128K, the new 1’st is now for $127K. So basically no equity.

The 2’nd was a home equity loan for only 16K that I took out before I got into trouble.

I had that one with Wells as well but they wrote it off and sold it 2 years ago.

A few months ago, an investment group bought the bad loan and was represented by a management / collection company and started making threats.

I blew it off for 4 months thinking that sense there was no equity, I’m now in good standing on the 1’st, so nobody was going to move forward with anything. Just didn’t make sense.

But, they did….start the process anyway.

In Texas, the 2’nd lien holder (bank or investor who bought the bad debt) has to get persimmon from a Civil Judge to foreclose and to put your house on the auction block, and I got served that they were doing just that.

I spoke with a couple of lawyers and basically the 2’nd lien holder can force the sale of the home, but who ever buys it must settle the 1’st.

I had always thought the 1’st would have to be paid off before they could do anything. Not the case. They can force a sale for your house w/ the 1’st attached and who knows what could happen.

Depends on how much equity you have but who knows what could happen if your house (w/ the 1’st) is sold as a package at auction.

So even with no equity, somebody could buy it at auction, pay off the 1’st, and toss me out. Once they have court permission to do so. Despite the fact the buyer would lose thousands. (In my case)

All the same, not worth the risk. I worked out a decent deal with the 2’nd lien holder.

So….. Yes they can “foreclose” via forcing a county auction sale no matter what the deal is on your first. They might want Joe blow to buy the whole package or they might want to buy it. Either case, who knows what could happen.
0 votes Thank Flag Link Sun Jan 16, 2011
Yes they can. You may be able to work out a better alternative, but the 2nd has full right to foreclose.
0 votes Thank Flag Link Mon Jun 7, 2010
I am a real estate investor that holds many 2nd mortgages. If the borrower has not been making payments to the 2nd mortgage holder (you) but has been making payments to the 1st mortgage holder do the following:

Write a letter to the first mortgage holder indicating that you are planning forclosure. Offer to let them purchase the 2nd mortgage usually at a negotiated price. Banks today do not want to lose a paying customer. If the original Buyer is upside down on their loan, banks typically will not lend to someone in foreclosure and they do not want to have another property on their books.
0 votes Thank Flag Link Sun Jun 6, 2010
Dear Bart

one thing I think you should know that is worth mentioning here...... Even though, technically, they can foreclose - the 2nd lender in most cases will not do so for many reasons. They are in 2nd lien position and therefore you do have a LITTLE leverage with them because of this (not much I might mention). Just call them up and talk talk talk. More often than not they will agree to some type of forbearance or acceptance of payment from you of some kind. Remember foreclosures are very expensive for any bank. Hope this helps. Andrew
0 votes Thank Flag Link Fri Mar 5, 2010
It is unfortunate but if your late on either loan a lender can foreclose. This has been a very sad time in real estate.
0 votes Thank Flag Link Fri Mar 5, 2010
Yes they can. If it is a line of credit see if you can negotiate the amount owed- ask for a settlement that usually will forgive 25 percent of the amount-by the way is a good deal but it will go on your credit and a 1099c for cancellation of debt will be issue by the bank at the end of the year. Explore your options.
Nicaury Miller
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0 votes Thank Flag Link Fri Mar 5, 2010
Yes. No matter how large or small your second mortgage, your lender can call the loan.
0 votes Thank Flag Link Thu Mar 4, 2010
Yes, the second lien holder can foreclose even if your first is current. The question is, just because they can, will they really? Depends how much you owe on your first. If you owe alot on the first, the second will determine if they should foreclose or if they should just wait to see if you'll pay it current. If the second forecloses on the property, they have to pay off the first mortgage to get clear title. Plus, the second has to determine if it's worth getting title to the home since they have to turn around and sell the home to recoup their money. Bank owned properties generally sell for less than owner occupied homes. From my experience, unless the home has alot of equity (which alot of homes do not) it's not worth it for the second to pursue the foreclosure. Trust me, I got into this business as a real estate investor and have purchased alot of pre-foreclosure properties as well as going to the foreclosure auction to buy homes. It's normally the first mortgage who does the foreclosing.
0 votes Thank Flag Link Thu Mar 4, 2010
Yes they can! In fact, your State can also begin foreclosure for back taxes.
0 votes Thank Flag Link Thu Mar 4, 2010
They certainly can and do.
0 votes Thank Flag Link Thu Mar 4, 2010
They sure can and they do - alot! Many have the mob mentality similar to the Saprano's and they make it look and sound like the agent is messing up the transaction for their client. I hope our legislators get a grip on these folks and soon! Get legal advice from a competant legal attorney who has foreclosure experience. Also, ask your accountant about the tax implications, if any. AND, when you talk to them do as they do - record the conversation! I would also ask them to produce the note.
0 votes Thank Flag Link Tue Mar 2, 2010

I think you get the idea. A junior lien holder can foreclose on a property. Speak to an attorney that handles real estate cases; they may be your best alternative.

Javier Olmedo, ABR, GRI
Florida Realty of Miami
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0 votes Thank Flag Link Mon Mar 1, 2010
They sure can. If you are having trouble making your payments you should contact your lender directly. Many lenders today are working with homeowners to help keep them in their homes. Call your lender to find out what options there are available for you.
0 votes Thank Flag Link Sun Feb 28, 2010
Hey Bart,

The second lien holder can and will foreclose on your loan. Don't take it lightly. Call them and talk with them to see what can be done to get it current or worked out in some manner.
0 votes Thank Flag Link Sun Feb 28, 2010
Yes the 2nd lien holder can foreclose on your home even if the 1st is current. Have you looked into a loan modification, talked with an attorney, researched on short sales, bankruptcies, foreclosure, deed in lieu of foreclosure?

Just some things to think about
0 votes Thank Flag Link Sun Feb 28, 2010
I'm not an attorney, and you should really speak with a real estate attorney before its too late. But, if the second is in default, it's my understanding that yes, they can foreclose.
0 votes Thank Flag Link Sun Feb 28, 2010
Best confer with 1st lien holder on your home OR real estate attorney. My assumption that 2nd lien is more than likely equity line of credit ? or a 100 % finance .

1st lien holder decision what would take place 2nd lien has smaller stake in ownership of property. You won't be able sale the home unless 2nd lien holder release or paid off at closing.

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0 votes Thank Flag Link Sun Feb 28, 2010
This is a classic example of why it can be scary to buy a home on the courthouse steps. Could be a junior lien holder foreclosing, and the other liens don't just disappear. Absolutely, a junior lien holder can foreclose. We're seeing it happening, even here in DFW where things are better off than many other regions of the country.
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0 votes Thank Flag Link Sun Feb 28, 2010

They can and that is a really bad situation to be in. The second may be very aggressive and knock the first out of position. My advice is to talk with the first and see if they can refi you and help protect your home and their investment. Be careful. Best
0 votes Thank Flag Link Sun Feb 28, 2010
I had some neighbors that thought that the second could not forclose. In fact that was their arguement in court! They were good people but a little to smart for their own good. I was sorry to see them have to leave the neighborhood.
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0 votes Thank Flag Link Sat Feb 27, 2010
I am a Realtor & an Attorney (30 yrs) licensed only in OH & you are not a client. So, comments I make are only my personal opinions. You don't say what your 1st & 2nd liens are; but, I am assuming a 1st & a 2nd mortgage loan. Typically, banks will sell their 1st mortgages into the secondary market; BUT, they typically keep their 2nd mortgages (equity loans or HELOCs (home equity lines of credit)). It is not uncommon for a 2nd mortgage holder to foreclose on a home & bid it in at Sheriff's Sale. So, I would be concerned about a foreclosure by the 2nd mortgage holder.
0 votes Thank Flag Link Sat Feb 27, 2010
Tell the 2nd lien holder to "Produce the Note" if they cant produce it can will back off for a long while. They cant start foreclosure proceedings without the note. Most likely the loan was bundled up and sold on the second market and the bank is only servicing the loan. So really they got paid the investors are the ones that are screwed not the bank. Good luck
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0 votes Thank Flag Link Fri Feb 26, 2010
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0 votes Thank Flag Link Fri Aug 15, 2008
YES. They will pay-off the first lien (mortgage) at the auction unless someone pays them both off at the auction. If you need to sell you property no matter what your equity stance is I can help you by BUYING the property. I can close in 1-2 weeks too if you need a fast sale. Contact me if you would like to know more.

Best Wishes,
Will Robles
0 votes Thank Flag Link Sun Aug 3, 2008
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