When buying a foreclosure at auction financed 80/20 and the foreclosure is on the 80 are u responsible for 20?
Question:
Person buys a house for 100,000. They take out two loans. One loan for 80,000 (80%) and the other one for 20,000 (20%) to avoid PMI. They fail to make their payments and the house is foreclosed on by the lender. When the house goes to auction at the courthouse, the foreclosure is on the 80,000 (80%) portion. Upon successful biding is the highest bidder now also responsible for the 20,000 (20%) portion or is it wiped clean after the foreclosure proceeding.
Answer:
No, the 2nd Trust Deed is not wiped out in the foreclosure proceedings. Anything that they get for the home will go to the 1st Trust Deed, and whatever is left over goes to the 2nd.
The way this works is if this home goes into foreclosure and the mortgages are held by the same company they are combined. Or in the case the the 80 % loan has equity, its used to pay off the smaller loan. Banks are going to get their money no matter what so if its owed its going to be paid. The only time the homes are sold for less than what is owed is if there is a deferred maintance issue.
No, the 2nd loan will be paid off during the foreclosure. You should get title insurance to make sure you have clear title to the property. Ask the attorney or title company involved for a copy of the Trustee Sale Guarantee (report that shows all the liens and other important info) there might be a fee for it. Good Luck!
It depends. If the lender who held the 80% mortgage named the lender who held the 20% mortgage as a defendant in the foreclosure and received a judgement against the 20% mortgage holder, then that 20% mortgage is gone.
However, if the 20% mortgage holder was not named OR if it was named but not foreclosed upon in the judgment, then the 20% mortgage is still good.
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