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ginamackey

I secured a loan for the tenants who were living in my home in Giddings, TX. The loan is a 80/20, with me carrying them for $18,000. It seems that I cannot sell the loan due to no equity. The buyers have not paid the payments required. They will not answer my phone calls or voice messages. What recourse do I have with this note, and what happens if they foreclose on the first note? Please advise...thank you in advance

nemmar · Site Admin

Hello, Sorry for the delay in replying to your post. Basically in a foreclosure process the lenders with the first mortgage loan position will always get paid first, then the second mortgage holder, then third mortgage holder, etc.

That is why a first mortgage is the most secure loan position for a lender. However, even if someone is paying thier first mortgage loan payments, they will still go into foreclosure if they are not paying the other loans on the property. In your case it's different since you are the second mortgage holder. You have to check the local laws in your area since each area is a little different. But it seems like you are in a difficult situation. If you foreclose on the tenant/owner to try to get your $18,000 and the sale of the property does not cover your first mortgage loan balance, then you will lose money plus the legal fees for foreclosure. You need to speak with a real estate attorney in your area to find out what legal options you have.

ginamackey

Too late. They just filed Chapter 13 with me listed as a creditor. Hopefully the house will appraise for more than the first loan upon sale and I can recoup some of my money as the 2nd lender. Am I correct?

nemmar · Site Admin

Yes, you are correct. The house needs to not only appraise for more than the first loan but it also has to be auctioned/sold for more than that plus any legal fees. Then you would be able to get some of your funds back.