Possible Foreclosure with 2 Mortgages?

Question

Hello,

I bought a house in Feb 2007 for $104,500. (I have 2 mortgages, one for about $83,000 and the other for about $20,000). I didn't know much about buying a home and I think I may be a victim of mortgage fraud. At the time of purchase, my house was in need of repairs and assessed at about $53,000. I've tried to repair the house, but it is just too much for me financially (and I've even have a part-time job in addition to a good full-time job)...to the point that my credit is terrible. I'm thinking about letting it go into foreclosure, and since my credit is already bad I don't see it getting much worse. Is this the right way to handle this, or what good can come from pursuing a "mortgage fraud" case in court? Could my mortgage be erased/reversed? What happens with a foreclosure when there are 2 mortgages involved? What options do I have because I don't know what else to do and foreclosure seems to be my only option...

Please help!! I would greatly appreciate any advice that you would have to offer me.

Answer 1

When a financial hardship comes up, and there is not enough income to make all of the mortgage payments, more than one of the lenders may initiate foreclosure proceedings in the county court at roughly the same time. In fact, if one starts the process of filing paperwork in the court system, all of the others may also file as soon as they are aware of the first foreclosure, and that the homeowners are behind on all of their bills. This situation can be somewhat confusing for homeowners, though, if the second mortgage files first, followed by the first; or the HELOC holder filing first, followed by the first and then the second.

But, to put it in as simple terms as possible, filing foreclosure is simply one creditor, who has had the house pledged as collateral for a mortgage loan, asking the appropriate local court to sell the house, in order for the mortgage company to regain any losses experienced on the nonpayment of the loan. The fact that more than one lender is claiming losses at once, when all of the lenders are behind on payments, should not be surprising at all.

It will be the court itself that orders the sheriff sale of the property, as long as the plaintiff in the case, the bank, can prove that the loan is in default and that the property is collateral. This, of course, is usually quite easy to prove, and, far too often, homeowners do not even make an appearance at the foreclosure hearing to make an answer or request more solutions outside of the legal foreclosure process. However, in any case, it does not matter if one mortgage company or lienholder files foreclosure paperwork first or second, as the proceeds from the eventual foreclosure auction will be paid out the same way. The order of payments is determined far in advance, even before the house is sold to the foreclosure victims to begin with.

At the sheriff sale, any back property taxes will be paid off first. Then, the first recorded mortgage will be paid off. After that, any other parties will be paid off in order of when their lien was filed with the county recorder. The only exception would be for a mechanics lien, which may not be recorded at the time of the foreclosure or auction, but the creditor may be able to collect a portion of the proceeds before an earlier-recorded lienholder. This is a somewhat more uncommon event, though, and most homeowners in foreclosure will not experience it. It is also a broader topic than can be discussed fully in this post.

It is the order in which the parties had filed their liens, for the most part, that will determine who is paid off with the proceeds from the auction first, second, third, and so on. Not surprisingly, county property taxes are always paid off first, since the government needs to make sure it gets its share before anyone else. Also, this prevents the new purchaser from having to pay off the back taxes or worry about a tax foreclosure if the transfer does not take place quickly. County property taxes are almost always paid to a current status or otherwise settled in any sale of real estate, whether through foreclosure or otherwise.

Thus, the payment of proceeds from a sheriff sale is not determined by which lienholder files for foreclosure first; rather it is decided solely by the recorded date of the lien. Any lien is counted in the determination of order, whether it is a first mortgage, second mortgage, judgment lien, income tax lien, or other assessment.

This is also a major reason that second mortgage companies are often far more willing to work with homeowners in setting up a repayment plan or taking less money on a short sale: they know that, in a foreclosure auction, they will probably not be paid any of the proceeds after the taxes and first mortgage are paid. Other liens beyond the second mortgage often have even less of a chance of getting any real benefit from forcing a sale of a property through foreclosure.

However, any lienholder who has had the property pledged as collateral for a loan can initiate foreclosure proceedings. Even second mortgage companies will start the process if the homeowners are not in contact with the bank and have not expressed an interest in getting the monthly payments back on track. They may hesitate to file for foreclosure, but no response by the owners will eventually force them to take action in the courts. Homeowners will most likely be facing only one foreclosure action against them by a first mortgage company, but this does not preclude the possibility of facing more than one foreclosure lawsuit at a time.

Hope that helps.

ForeclosureFish

Answer 2

You sound like your lost,But really your not.if your able to live in your home whats the problem.if your able to make the existing payment ,agian whats the problem.90% of all home repair you can do your self,Its easy just time consuming.Having a contractor come in is stupid.Unless you have no skills. I would suggest going to homedepot and learn.You can demo,put up drywall,tape texture and paint for a few hundred dollars.and knock it out in two days. that is in the average size room.kitchen remodeling can be expensive if you let your self get sucked in by high price aplianances.Granite counter tops are a rip off.there are tons of options out there.if you are looking for a quick fix and hire all the work out ,Well you deserve what you get.however if you take your time and do the work yourself you will save thousands and have pride in your home. Think about it.

Answer 3

Doesn't matter if you have 1 or 4 mortgages.  If you don't pay what you owe, you will be foreclosed.  The bank will send you a letter telling you the deadline to pay up or lose the house.  You could save them the trouble and just hand them the keys today (if it's a local bank).  If you don't pay, the sheriff will escort you out and the bank will be the new owner.

Now , the handling of your personal situation is a different matter.  Some people lose their house in 2008. By 2010 they are doing great.  Life is wonderful. But that 2008 foreclosure means they will pay 22% interest when buying a car (even tho the sign says Zero % interest for qualified buyers).  If we could know the future, we could know what to tell you.

The other wild card:   If you knew that your house would be worth $250,000 in 2012,  you would do anything to hold onto it.  It is very possible that inflation could occur in the USA.   Working 2 jobs, i have the feeling that you can hang on to this house.

Answer 4

They have counselors you can talk too...Look under FHA and they will lead you to help.  I think one of the programs is called    HOPE.  Look under how to save your home from foreclosure.

Answer 5

First off the Assessed value has nothing to do with the actual value of the property.  That number is used purely for property tax purposes.

Secondly, to prove mortgage fraud would be quite difficult.  You have to find an attorney who is well versed in TILA, HOEPA and RESPA and then all your loan documents would have to be examined to find any "errors".

Then if the court were to find in your favor you will be required to pay back the money you borrowed.  Its a misconception that if you have a violation on the mortgage that you just get the mortgage wiped out - you don't.  You will get a credit for all the interest you paid and any closing costs and most likely your attorney fees, but above that you have to write a check to the lender for the balance of what's owed.

If you are working 2 jobs and still not able to make the mortgage payments, then unfortuanely you bought too much house.  Chalk it up to a mistake and just walk away.  Bankruptcy may be a viable option especially if your state allows for Deficiency Judgments.

Mr Financial Freedom

http://www.5stepstofinancialfreedom.com