It is very normal (actually mandatory) to name junior lienholders in a foreclosure suit. That’s probably why you were sent the summons and complaint. My suggestion is to read the complain CAREFULLY and look for a specific paragraph that explains why you were named and what kind of relief the plaintiff is seeking from you. If all is says is what you said in your posting, then you can probably toss the thing since you don’t expect to recover anything anyway. It’s always a good idea to run any lawsuit by a knowledgeable lawyer. He can tell you in two minutes if there is anything you need to worry about.
About a year and a half ago, I sold a property via owner-financing to a buyer. I created a note and sold it to a third party shortly afterward to get my money out the deal and take my profit. Today, I received a court summons to provide information because this house apparently went into foreclosure. Is it standard to contact the previous owner in a situation such as this? I don’t think I can be held accountable for this foreclosure since the note buyer did their own due diligence. The summons said they are attempting to collect a debt and obtain information related to this case.
Despite what is said below… - Posted by John Behle
Posted by John Behle on December 24, 1999 at 24:18:05:
…there could be another reason.
Depending how you sold the note, you may have given recourse. You DO need to run this past an attorney to check for that. I’ve been in that situation. I had two lawyers tell me not to worry about it. Their free advice cost me $10,000.
If you sell a note, recourse generally is given unless it is specified otherwise. The difference can be whether you assigned the note or assigned it “without recourse”. Check on any documents you signed and endorsements you made. I wouldn’t just not worry about it until the issue of your potential liablity is clear.
It is very likely that you are only named because you are a junior lienholder, but check out this issue. Many note buyers try to stick the seller with recourse (meaning liability for the payment of the note) or just slip it by them.
Re: Received a court summons. Is this normal? - Posted by Millie I.
Posted by Millie I. on December 22, 1999 at 23:50:51:
Mike,
Every foreclosure suit that I have seen always lists the the homeowner plus all other lien-holders as defendents.
When the lender forecloses on the first mortgage, they are legally required to notify all other lien-holders, because if the foreclosure goes through successfully, it means that all other lien-holders ‘may’ lose all their interests in the property. The notice allows other lien-holders to come foreward to buy off the first mortgage if they so wish in order to save their own interests ( or to buy wholesale if the price is right). Also, if the property was sold at foreclosure at a higher price than the balance of the first mortgage, there is a chance that the second or third lien-holder may have a little money coming back to him, (slim chance, but does happen).
This is how it works in my county, there will be some variation in other states and counties. ( I am just an investor like you, I am not an attorney). The best way is to call the foreclosure lawyer that sent you the summon. The foreclosing lender will be paying for the time their lawyer spends to explain details to you. You could ask your own lawyer, but you will have to pay him, so don’t spend your own money unless you need to.
Good Luck and relax, I don’t beleive that you are in trouble, this may be an opportunity if the cards play in your favor. Check it out.
I am a tax lien foreclosure attorney and we have to go back at least 20 years in the chain of title searching for liens and judgments. It doesn’t sound like
you were joined as a defendant so this may be just an inquiry into whether you still have some interest in the property as a current mortgage holder, etc. Maybe the person you sold the note to did not record it. It could be any number of things. Give the attorney a call
and ask him why you got this letter.
I did carry back a second when I sold the property to the buyers. They paid me two times since the sale and never received a dime from them again. I figured the loan would eventually go bad. Is it standard for any junior mortgage holders to get summoned? I thought any junior liens would be dropped anyhow.
By the way, it does list me as a defendant. The complaint states that the plaintiff is seeking termination of the second mortgage.
DISCLAIMER: Although I am an attorney, the following is for discussion purposes and is not intended as specific legal advice, PLEASE RETAIN YOUR OWN COUNSEL
AS TO HOW TO PROCEED. In a foreclosure all junior lienholders must be named as defendants because the foreclosure will cut off their interests (wipe them out). You got served with a summons and complaint notifying you that your interest
in the property will be affected by these proceedings.You can file an answer contesting the priority or you can pay off or try to reinstate the senior mortgage however it sounds like
you have no interest in doing so. If you do nothing default will be entered against you and your mortgage
will be cut off. Basically, you will be walking away from what is owed to you but it sounds like you have written it off anyway. I don’t know why you were given FDCPA’s mini-miranda. That is for consumer debt.
that the language about attempting to collect a debt and otaining information for that purpose is form language that is requiret by the federal Fair Debt Collection Practices Act (FDCPA). It has nothing to do with your second mortgage situation, or the fact that you created and sold the original note and mortgage. Relax and enjoy Christmas.