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Seattle Scott
Seattle Scott, Lawyer
Category: Real Estate Law
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In Texas. The Borrower on a First Mortgage went to arrears

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In Texas. The Borrower on a First Mortgage went to arrears on Property Taxes and the Tax Lien was purchased by a Tax Lien Loan Company and the Tax Lien Loan Company placed a Lien on the Property. The Borrower signed an Agreement with the Tax Lien Loan Company to make Payments to them for the past-due Taxes. Is the First Mortgage still in first position with the Tax Lien Loan Company's Lien in second position?
If the property went to a tax lien foreclosure sale and was bought by the Loan Company, the first mortgage ( as a lien or encumbrance) was extinguished and the first mortgage owner can't foreclose.

But I am not sure I understand the facts. Did you do a deal up front with the Loan Company to pay the taxes and you would make payment to it, or did the Loan Company show up and buy at a tax foreclosure sale?
Customer: replied 3 years ago.

I am investigating buying the Mortgage Note. The Tax Lien Loan Company paid the Borrowers back Property Taxes at a Tax Certificate Sale. The Tax Lien Loan Company then made an Agreement with the Borrower where the Borrower would pay the Tax Lien Loan Company in installments for back taxes, interest and fees and the Lien was in the name of the Tax Lien Loan Company.

Customer: replied 3 years ago.
Relist: Answer came too late.
Texas is a tax deed sale state, meaning it doesn't sell tax liens, it sells the property itself. Mortgages ( technically deeds of trust) are wiped out as the result of the sale, with the only exception being if the owner redeems the property from the tax sale purchaser ( there is a 6 month to 2 year redemption period) before the state gives a deed, then the encumbrances/deeds of trust would reattach.

From your facts, it appears the Loan Company bought the property ( the minimum bid at the tax sale is the taxes owing) under an advance agreement with the owners, otherwise the Loan Company would just wait to see if the owners could redeem (redemption price is sale price plus 25%) rather than accept monthly payments. In other words, I assume the owners are not going to "redeem" and have the debt reattach to the property, but are going to try to buy the property back from the Loan Company (a sale) so the debts to not reattach.

If you buy the mortgage note, it will be unsecured, just a promissory note with the deed of trust removed.

The only other possibility is that the owners borrowed from the Loan Company and paid the taxes before the sale and gave the loan company the lien you mention as security. Then the mortgage/deed of trust would still have priority. I don't see a lender doing this kind of deal.
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