It is not uncommon for homeowners to have several loans secured by their homes. In these situations, several lending agencies, such as banks or other mortgage companies may hold a lien to the home. Should a homeowner fail to pay on any of the loans secured by his or her home, the lien holders can foreclose on their home, forcing a sale to recoup their money. However, because some lien holders realize that they may not get the amount owed to them in a short sale or foreclosure, they can make either process difficult for the homeowner.
Generally, even though lenders who come after the main mortgage lender, also known as junior or secondary lien holders, can initiate a foreclosure action to recover their money, as a practical matter it presents some problems. The primary mortgage lender on a home, who is the senior lien holder, is not likely to be involved in the foreclosure and therefore, even if a foreclosure sale is ordered, the next buyer of the home would take ownership of the home subject to the first mortgage. This is likely to put off any potential buyers who may not want to be saddled with a prior debt on a property they just bought, having to pay it off in order to own the property free and clear. Furthermore, the senior lien holder can also still foreclose on the property at any time, even after the sale.
As with the homeowner, the junior lien holder of a property where the primary mortgage is in default can pay off the debt to the senior lien holder in a process called redemption, in order to avoid the situation described above. In this case, after the junior lien holder forecloses, the property can pass with clear title to the buyer.
With homeowners seeking to sell their homes through a short sale, the existence of multiple lien holders can delay and otherwise approved sale for months. Sometimes, even when the senior lien holder has agreed to a short sale, the junior lien holder can cause delay by trying to negotiate higher amounts of what it will receive after the sale. The negotiations can often take a long time, and interested buyers may walk away to avoid the hassle. If the junior lien holder suspects that a homeowner can pay more than they are letting on, they may delay the sale until the homeowner either agrees to a higher payoff amount, or negotiates to continue making monthly payments. Junior lien holders can also agree to a short sale, only to come after the homeowner for the balance of the loan later, if it was not waived in negotiations.
Contact Us For Legal Assistance
If you are going through foreclosure, or have debt with multiple lien holders secured by your home, you need to consult an experienced attorney to learn how junior lien holders may affect you in a foreclosure or short sale situation. Contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for professional assistance with your case.