2nd Mortgage

[BSH]

Hello. I put a roof on a family member's house, as well as installed a new HVAC system and paid several months' mortgage to help out. Unfortunately, this person is now losing their house to foreclosure. I'm attempting to work with another person to do a short sale purchase of this house, but if that doesn't work, it's been recommended to me that I put a 2nd mortgage on this house. The way it was explained to me is this. If the bank gets more than they need at the foreclosure sale or through REO sale or whatnot, any left over would go to me if I have a 2nd mortgage. The homeowner (family) is willing to sign a 2nd mortgage, and I know how to file it with the county, so it sounds like a no-brainer. What do you all think?

Other thing . . . does anyone have a 2nd mortgage form that I could use? Having trouble finding one.

Thanks!!!

[KCHomebuyers]

I'd have to disagree with being made whole (or getting any part of the debt) at the auction. The reason is because almost every house goes back to the bank for the starting price of the mortgage - which means that second would get wiped out anyway.

However, if you do need a promissory note secured by real estate, email me and I'd be happy to send you the docs I have on it!

Now what you could do is write up the note to state that should any pre-existing senior lien file foreclosure, then the borrower will execute a deed into trust, naming you as trustee, signing beneficial interest to you. I'm not sure of the legality of that, you'd have to check.

But what that'll do is give you control of the property so that you could bring it current and sell the house if you want to.

[Jim Johnson]

Hello. I put a roof on a family member's house, as well as installed a new HVAC system and paid several months' mortgage to help out. Unfortunately, this person is now losing their house to foreclosure. I'm attempting to work with another person to do a short sale purchase of this house, but if that doesn't work, it's been recommended to me that I put a 2nd mortgage on this house. The way it was explained to me is this. If the bank gets more than they need at the foreclosure sale or through REO sale or whatnot, any left over would go to me if I have a 2nd mortgage. The homeowner (family) is willing to sign a 2nd mortgage, and I know how to file it with the county, so it sounds like a no-brainer. What do you all think?

Other thing . . . does anyone have a 2nd mortgage form that I could use? Having trouble finding one.

Thanks!!!
If you create a second, and you need to understand local law... you could create options for yourself down the road. You could take the home with a deed in Lu on the second and bring it current. This allows you the same right as any other lender in the chain of title that might do the same thing. As a second you can make payments on the first and keep the home. You might also have redemption rights after the sale. I am not familiar with foreclosure law in your state but the first thing you must know is if the foreclosure process has in fact started. In Colorado we call it a NDF date or notice of default. Rights change once that date is met so it is a good one to know. So I agree... you should file the second...

[mike07]

Thanks for the information. I was ready to take out a second mortgage loan (http://www.gmacmortgage.com) without the deed or knowledge of foreclosure laws. I will do more research before I get started on my loan and remodeling. Thanks again.

[KCHomebuyers]

You definitely want to check the foreclosure laws in your state. I recently learned that in KS and MO, when the second files on the owner and takes it to sale, the second place mortgagor can take the first mortgage subject to.

Basically, for the price of writing off the second, you vcan take over the house. Now, the only advantage you'll have is if the house is around 80% or less LTV.

Otherwise, I'd definitely look at them filling out paperwork for a deed in leiu, and escrowing that paperwork for when you need it (most likely not "if" you need it).