Posted by jeff on July 08, 2002 at 17:15:05:
when the holder of a second mortgage forecloses the first is generally unaffected other than havnig to start billing the new owner, which is established on the courthouse steps at the foreclosure auction. when the second forecloses the first remains the first mortgage on the property unless the new owner decides to pay it off, that is entirely their choice. the DOS clause is not triggered at a foreclosure auction.
in your scenario you could theoretically purchase the property for 60K plus legal fees, selling costs, interest per diem, and any other charge the holder of the second has to absorb in order to recover their lost cash. lets say 5K for those charges (which is more than likely on the optimistic side), so the holdr will bid 65K to protect their investment. you can outbid them and take it if you desire but you now haev the property with a first mortgage of 300K that has to be maintained and hopefully is not behind and has to be brought current. any junior liens to the second, third, fourth, fifth, etc., will get the overage paid at the auction towards their debts. anythign left after that goes to the past owner’s for their equity cash out.
everythign works just like the forst other than the original first remainin in tact and continuing to be paid until it is paid off in full. you more or less assume that loan and pay off the second and either pay off or wipe out anything below it.
if the holder of the second buys it back in order to protect their interest in the place, then they handle it the same way the first wuold have or any other way they desire. it is theirs, they can do what they want with it.