Full question:
We are trying to purchase a home that is in foreclosure. The home has a second mortgage on it. The second mortgage company that was served the foreclosure notice (and is the recorded mortgage at the clerk's office) is not the mortgage company that holds the current second mortgage. Are they considered to have been served if the original second mortgage company was the company served during the initial foreclosure procedure?
- Category: Real Property
- Subcategory: Foreclosure
- Date:
- State: Oklahoma
Answer:
A mortgage holder must include all "necessary" parties in a foreclosure suit. A necessary party is anyone with an interest in the property that arose after the original mortgage was taken out. This includes parties with easements, liens, or leases. If they are not included in the case, their rights remain intact, and the purchaser does not gain full ownership.
For example, if a person takes a mortgage from one lender and later takes a second mortgage from another, the first lender must address the second lender's interest in the foreclosure process. Otherwise, the second lender can enforce their mortgage against the new owner of the property.
There are also "proper" parties, who have an interest in the property before the mortgage and may not need to be included in the case unless the court deems it necessary. However, courts often require their inclusion for clarity.
In cases of second mortgages, if the second mortgage has been assigned to another lender, Oklahoma law requires that assignments be recorded within four months. If not recorded, payments made to the last recorded lender may be a defense against the mortgage action, unless the borrower had actual knowledge of the assignment (Oklahoma Statutes). Therefore, whether the second mortgage was properly assigned and whether the correct lender was served in the foreclosure must be examined. If the current second mortgage holder was not served, they might seek to reopen the foreclosure to protect their rights, but they would need to pay off the first mortgage to gain title to the property.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.