Foreclosing as second in TX- Must pay off first in cash?

Posted by Bill H on May 11, 2005 at 15:51:50:

In Reply to: Foreclosing as second in TX- Must pay off first in cash? posted by Second Lien Holder (TX) on May 11, 2005 at 13:37:15:

: I am in Texas and am foreclosing as the second. I have beaten the first to the punch because the owner is in Chpt 7, but the court has granted me a release of stay so I'm going after him before the first knows that hit them.

: My main question is if I, as the lienholder, bid the amount of the first and my second (credit bid) and it is the high bid, must I pay off the first in cash or simply reinstate that loan until I can refinance or assume? If they don't like it, must they go through the foreclosure process with me?

: Thanks in advance!!

2nd TD HOLDER:

My main question is if I, as the lienholder, bid the amount of the first and my second (credit bid)..

I am not sure I understand. In order for you to foreclose you do not need to bring the first current. At the sale, you or anyone else bidding will be bidding subject to the first. It will have to be an open bid process and anyone can bid against you. Any overages will be credited to any junior liens, etc. and after all are paid off the excess will go to the homeowner....NOT....to you or the first TD holder.

and it is the high bid, must I pay off the first in cash or simply reinstate that loan until I can refinance or assume?

As I stated before you will be taking the property subject to the first TD. In order to prevent their foreclosure at a minimum you or the successful bidder will have to bring them current.

Some lenders will not bother you and allow you ( as secnond liend holder) to continue to pay. Others will play hardball and demand payoff, loan assumption fees, qualification, etc. All depends on the lender and how they feel that particular day. Most likely as long as their present interest rate is higher than the current market they will probably leave you alone...however....they still, if interest rates rise, have the right to call the due on sale clause later and demand payment in full...not likely to happen but a possibility.

If they don't like it, must they go through the foreclosure process with me?

Yes, they will have to foreclose you out...they cannot just arbitrarily take the property from you. You can then re-fi or apply for assumption, etc., whatever suits you/them best.

Good Luck,
Bill H

Follow Ups:

• Re: Foreclosing as second in TX- Must pay off first in cash? - Second Lien Holder (TX) 10:57:22 05/12/05 (0)

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Comments:
: : I am in Texas and am foreclosing as the second. I have beaten the first to the punch because the owner is in Chpt 7, but the court has granted me a release of stay so I'm going after him before the first knows that hit them.

: : My main question is if I, as the lienholder, bid the amount of the first and my second (credit bid) and it is the high bid, must I pay off the first in cash or simply reinstate that loan until I can refinance or assume? If they don't like it, must they go through the foreclosure process with me?

: : Thanks in advance!!

: 2nd TD HOLDER:

:  My main question is if I, as the lienholder, bid the amount of the first and my second (credit bid)..

: I am not sure I understand. In order for you to foreclose you do not need to bring the first current. At the sale, you or anyone else bidding will be bidding subject to the first. It will have to be an open bid process and anyone can bid against you. Any overages will be credited to any junior liens, etc. and after all are paid off the excess will go to the homeowner....NOT....to you or the first TD holder.

: and it is the high bid, must I pay off the first in cash or simply reinstate that loan until I can refinance or assume?

: As I stated before you will be taking the property subject to the first TD. In order to prevent their foreclosure at a minimum you or the successful bidder will have to bring them current.

: Some lenders will not bother you and allow you ( as secnond liend holder) to continue to pay. Others will play hardball and demand payoff, loan assumption fees, qualification, etc. All depends on the lender and how they feel that particular day. Most likely as long as their present interest rate is higher than the current market they will probably leave you alone...however....they still, if interest rates rise, have the right to call the due on sale clause later and demand payment in full...not likely to happen but a possibility.

: If they don't like it, must they go through the foreclosure process with me?

: Yes, they will have to foreclose you out...they cannot just arbitrarily take the property from you. You can then re-fi or apply for assumption, etc., whatever suits you/them best.

: Good Luck,
: Bill H


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