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This is a California real estate mortgage question. Some time back I did get some positive information from you folks, but now need to ask for more clarification (if possible). We hold a second note secured by a deed of trust, on a home in San Diego, CA. It is now looking like the current owners may fall into foreclosure with their first mortgage lender (Chase Bank). The first mortgage is $1.4million. The amount due us on our note (that comes to term end of this month, payable in full!) is about $400k. Since it is now obvious that we will not see this money without the house selling, we are now wondering what will become of our funds if Chase forecloses on the current owners. So that is our question: in that our note constitutes a lien against the property, what happens to what is owed us if Chase forecloses on this property? I sure hope that there is one among you who can shed some light on this for us. Many thanks! Brian
State/Country relating to Question: California Already Tried: A brief consultation with a real estate attorney (over the phone, we now reside in Texas). He advised that Chase had the option to simply sell the property for enough to satisfy that first mortgage, and that there was no way that we would be able to foreclose on our second and regain the property, unless we could somehow qualify for the first mortgage amount that Chase Bank holds (which we cannot). We didn't get into things beyond that. The second note we hold is due and payable in a lump sum after Oct. 31st (this month). We have not been receiving any sort of payments during the two years of this note. The current owners have had the property for sale for about 6 months, but have been asking a very high price, and have not received any offers. They have recently reduced it to something more realistic, but time has now run out with regard to our note.
Thank you for the post. Hopefully this will clarify where you stand. Chase has an obligation to act in good faith in selling/auctioning off the home and cannot dispose of the property in bad faith (i.e. knowing the market value of the property and disposing of the property for well below market value). The problem however is defining the market value of the property. Generally, the market value is determined by comprable sales in the area, factoring in any improvements/variations.
Additionally, any surplus from the sale would be forwarded to you after Chase's interest has been satisfied.
Attorney
Negotiate, Draft, and Review many complex commercial agreements each year.
Thank you Mr. Holloman! We just needed to know where we stand. Since we are not comfortable with trying to contact Chase directly about this we very much needed some advise from an outside expert. Even if we cannot get all of our funds, a portion of it would of course be a very good thing (especially in this economy)! From what we know of properties like this one in San Diego, they have held their value reasonably well. Geting it sold...well that's another thing altogether, but you've given us some hope that we may eventually receive at least part of what is due us. Many thanks!