When a house goes into forecloseure, which mortgage gets paid off first, the second or first?
kc asked:
I loaned someone money so they could get a second mortgage. Now I am afraid the house is going to go into foreclosure. Will my second mortgage be payed off first when it gets auctioned off, or the first? What does this mean for me?
Thanks everyone, and Michael, I am fairly sure that the two mortgages are through the same lender, so if this is the case, then I guess the first mortgage would be paid off first and if there was not enough money to pay off the second then I would owe that money. Is this correct?
Heidi
I loaned someone money so they could get a second mortgage. Now I am afraid the house is going to go into foreclosure. Will my second mortgage be payed off first when it gets auctioned off, or the first? What does this mean for me?
Thanks everyone, and Michael, I am fairly sure that the two mortgages are through the same lender, so if this is the case, then I guess the first mortgage would be paid off first and if there was not enough money to pay off the second then I would owe that money. Is this correct?
Heidi
Tags: Enough Money, First Mortgage, House Mortgage
July 10th, 2009 at 1:29 pm
Marian
The first gets paid off first. If left over money, it goes to the second.
The county gets the rest and they take a small fee and then you get whats left.
Nexxt tie
Sell is first
BP
July 13th, 2009 at 9:57 pm
Norman
I am not sure what this means for you, but the first mortgage will be paid off first because the first lien on the property is the first mortgage.
July 13th, 2009 at 10:55 pm
Jeffery
Money will be distributed in order of priority.
First priority will be real estate taxes. If monies are available after taxes monies will go to the first mortgage then the second mortgage, third mortgage etc., etc. The next money will go to any lien holders or attaching creditors. This process will continue until all liens and encumbrances on the property are paid. If by some chance there is still money left over it goes to the former home owner.
There are probably a few state specific exeptions to the above procedure but I wouldn’t count on it. I suggest contacting an attorney to discuss your rights.
July 16th, 2009 at 8:21 am
Clarence
Actually here is a clarification to all of the above:
The foreclosing note holder gets the money. So if you dont pay your 2nd mortgage, but pay your first, the second can foreclose on you and they get paid, not the first. However, they now own your property subject to the first loan (ie., they have to keep paying the first note holder).
So the general answer is: the foreclosing note holder and all sub-ordinate loans/liens are paid off or removed after a foreclosure action.
The following liens/loans remain INTACT after a foreclosure:
- IRS lien
- Local unpaid taxes (utilities, etc.)
- Any mortgage notes filed prior to foreclosing mortgage
July 18th, 2009 at 3:30 pm
Steven
When you say you loaned someone money to get a 2nd… what does that mean? The owner has a 1st mortgage, and you are the 2nd? or There is a 1st, a 2nd, and you are the 3rd lien? It sounds like you probably gave the owner an usecured cash loan and you are not on record as loaning any money against the house. If this is the case, the only way you will get your money is if the owner gives it to you. What you should have done, or what possibly you should now do is have your loan to the owner recorded so that if it does go to forclosure auction and they get more money than is owed for the house, that you would at least be in line to get paid (after the government, the 1st note holder, the 2nd note holder and so on)