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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 36185
Experience:  16 years real estate, Realtor. Landlord 26 years
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A 2nd mortgage is owned by a bank who sells it to its wholly

Customer Question

A 2nd mortgage is owned by a bank who sells it to its wholly owned subsidiary that is the legal holder & servicer (not owner) of the 1st mortgage on the same house.
2 years after selling the 2nd to its servicer; the servicer forecloses on the house in the name of the 1st. The servicer buys the house in the name of the 2nd lien, at an auction no outsiders attend, for $11,000 more than the total amount of debt due on the 1st mortgage, but, $ 250,000 less than the suggested highest bid on the servicer's bid worksheet created for the 2nd lien.
The $11,000 excess over 1st mortgage is credited to the 2nd, and the 2nd (now owned by the servicer's subsidiary) is suing the homeowner for the full amount of the original debt on the 2nd less $11,000.
Question: Does the homeowner owe the full amount of the debt less $11,000 on the 2nd? Should the homeowner receive credit on his remaining debt by whatever amount the servicer paid its parent when purchasing the 2nd? Does the suggested maximum bid on the servicer's 2nd lien bid worksheet have any legal effect on the homeowner's liability?
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  Barrister replied 9 months ago.

Hello and welcome! My name is ***** ***** I am a licensed attorney who will try my very best to help with your situation or get you to someone who can. There may be a slight delay in my responses as I research statutes or ordinances and type out an answer or reply, but rest assured, I am working on your question.

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Question: Does the homeowner owe the full amount of the debt less $11,000 on the 2nd?

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Yes, the proceeds from the sale are applied to the first and then any residual amount to the second with the borrower then being personally liable for the deficiency (depending on the state).

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Should the homeowner receive credit on his remaining debt by whatever amount the servicer paid its parent when purchasing the 2nd?

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No, what happened between the servicer and parent is not legally relevant. Whether they paid them full price or nothing, they servicer legally became the owner of the right to collect and enforce the second.

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Does the suggested maximum bid on the servicer's 2nd lien bid worksheet have any legal effect on the homeowner's liability?

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Not generally, that is just something that the lender works up to give them an idea as to what the property might sell for on the open market at a non-foreclosure sale. And that is a maximum bid suggestion, meaning that should be the highest amount the lender would want to bid on the property, not a mandatory bid..

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thanks

Barrister

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