MD Foreclosure Junior Liens - Posted by Paul

Posted by Jack on May 21, 2008 at 23:44:59:

Excess money over the opening can go a lot of places, but paying down senior liens is not ever one of them. The auction would quickly become ridiculous if that were true, as the bidding would immediately rise to the amount of all the senior liens.

MD Foreclosure Junior Liens - Posted by Paul

Posted by Paul on May 21, 2008 at 08:14:01:

I have a question regarding forclosure sales in MD. I want to understand what happens when you buy a junion lien at foreclosure subject to other senior liens. As an example, I went to an auction where a 3rd lien foreclosed (HOA). The amount owed to the HOA was about $2000.

There was a 1st lien due for $127k and a 2nd lien due for $50k (total $177k). The winning bid for the 3rd lien was $32k subject to the 1st and 2nd liens. Does that mean the bidder needs to come up with the $32k for the 3rd lien AND an ADDITIONAL $177k for the 1st and 2nd liens (for a total of $209k)?

OR, does the excess $30k over the amount owed to the HOA get applied toward the 1st lien? In this case the bidder would need to come up with only an additional $149k, for a total owed of $179k ($127k + $50k+ $2k - $32k).

Basically, does any excess bid on a junior lien above what is owed on that junior lien get used toward paying off any senior lien?

Thanks a lot


Re: MD Foreclosure Junior Liens - Posted by Dave T

Posted by Dave T on May 27, 2008 at 13:12:05:

Surplus funds are applied against any junior liens. Whatever is left over belongs to the homeowner. In your example, if $32K was the winning bid, then the homeowner just sold his house for $209K. The winning bidder takes over the first and second mortgages. The HOA is paid off $2K plus the cost of the foreclosure and they release their lien. The homeowner has a right to whatever is left over.