Re: 2nd mortgage rights after the sheriff's sale
Posted by Keith(CA) on August 05, 2004 at 13:26:10:
In Reply to: 2nd mortgage rights after the sheriff's sale posted by Wendy on August 05, 2004 at 11:38:37:
: The property in question is located in Wisconsin. The sheriff's sale ocurred 2 days ago. I attempted to purchase the property from the owners prior to the sale but for various reasons it didn't work out. I attended the sheriff's sale in order to see what would become of the property I had followed so closely, and researched so carefully for weeks. The bank opened the bidding at $111,748.00, the successful bid was for $136,500. After the sale, in the outer office, I asked the woman who bought it if she was aware of the $20,000 due in back taxes. She wasn't, and nearly fainted. Someone standing nearby, suggested to her that at the court's confirmation of sale, she could request that the surplus be applied toward the back taxes. This property also had a 2nd mortgage on it that, by Wisconsin law, was wiped out at the sheriff's sale. The 1st mortgage was held by a young woman and her boyfriend. The relationship wasn't working out and they'd both gone their separate ways, neither one making any payments on the house. The house had always been in the young girl's family and the 2nd mortgage was a purchase money mortgage made by the girl's mother. Since the 2nd mortgage was wiped out at the sale, mother was being badly burned. My question is this: does the 2nd mortgage holder have any right to attend the confirmation of sale, and request the surplus? Does the 2nd mortgage holder have rights to the surplus before the past due property taxes? She's an older woman in ill health. As I said, I met the owners and became familiar with the whole situation. The girl is very sweet and hard-working, but most likely she'll spend the rest of her life working in the mailroom at a local insurance company, trying hard to earn enough to pay rent on the efficiency apartment she now lives in. I'd like to see her mother get back at least some of the money she gave them, because the daughter still requires some financial help on a regular basis. If she has a right to the surplus, I'll do everything I can to help her get it. Thanks for your help. Wendy
Wendy,
Surplus always travels DOWN the lien seniority ladder, never up. The purchaser at auction always bids and buys subject to all liens and encumbrances senior to the foreclosing lien. Property taxes to the best of my knowledge are always the most senior lien, attaching at the highest seniority no matter when they are recorded. The gal who bought the property at auction is now responsible for the $20,000 owed in back taxes.
Once the foreclosing lienor is satisfied by proceeds from the highest bidder at auction, excess bid amounts go directly to the next lien down in the seniority chain. If no other claims were recorded between the 1st and 2nd mortgage, then the holder of the 2nd is entitled to the entire overbid amount up to the full balance of the lien. Any monies left over after satisfying the 2nd will go down to the next junior lien holder. This continues pro tanto until the overbid is completely disbursed, with the former (foreclosed) owner receiving the last of the surplus once all junior liens are satisfied.
Also, the 2nd was not "wiped out" by the auction. While it is true that the debt is no longer secured by the property because the lien was "wiped off" of the title, the foreclosure did not actually extinguish the debt (hint: only bankruptcy can discharge the debt). So even if mom doesn't get back the full amount owed, she is still entitled to pursue collection of that debt if she chooses (check for a statute of limitations to determine when it's too late)...but it sounds like mom would be willing to forgive the deficiency in this case anyway.
You never said how much the 2nd was for. But if mom's lien was next in line, then mom is entitled to be paid in full if her loan was for less than $24,752. If her loan balance was greater, then she'll collect the full overbid amount. Have mom keep in mind that even as she is entitled to collect any deficiency, so are other junior lienors that don't get paid. If the overbid runs out before all junior lienors are paid, mom sh
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