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Do both loans need to be paid off before a title transfer in foreclosure?

Do both loans need to be paid off before a title transfer in foreclosure?

Q: What happens when a second mortgage forecloses?

When a second mortgage forecloses, the lender has the right to sell the property to recover the unpaid debt. This can result in the homeowner losing their home. If the sale proceeds are insufficient to cover the debt, the borrower may still owe the remaining balance, which could lead to further legal action by the lender.

Full question:

I had two loans on a home. During a Foreclosure do both loans need to be paid off before a title can be transfered to someone else? And if so what would happen if you just found out that one of the loans never got charged off but yet someone else owns the house now? It has been 3.5 years and I have just found out that I owe $35.90 on the second loan and it is now going through the process of charge off after 3.5 years. Now as I understand it I will need to wait another 3.5 years before I can even try for a loan again...is that true or do I have some possible fighting writes? Please help me.

Category: Real Property
Subcategory: Foreclosure
Date: 04/07/2025
State: Michigan

Answer:

It is possible to sell a home even if there is a lien on the property. However, different types of liens can complicate the sale and may prevent the seller from providing clear title to the buyer. A judgment lien, for example, arises when a court grants a creditor an interest in the debtor's property due to an unpaid debt. If a judgment creditor places a lien on the property, they may enforce it by selling the property to recover the owed amount.

The term "charged off" means that the creditor has deemed the debt uncollectible for accounting purposes, but you remain liable for the debt until the statute of limitations expires in your state. Even if a debt is charged off, the creditor can still pursue payment, which may include legal action. In Michigan, a deficiency judgment can be sought, which is the remaining debt after the property is sold at auction.

Since you owe only $35.90 on the second loan, it may be beneficial to pay off this debt and negotiate a settlement with the creditor. The specific rules and options available to you will depend on the circumstances and the relevant laws in your state. Consulting with a local attorney can provide guidance tailored to your situation.

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.

FAQs

What happens if you don't pay your 2nd mortgage?

If you don't pay your second mortgage, the lender may initiate foreclosure proceedings on the property. This can lead to the loss of your home, as the lender has the right to sell the property to recover the owed amount. Additionally, if the property sells for less than the total debt, you may still owe the remaining balance, known as a deficiency. It's important to communicate with your lender and explore options to avoid foreclosure.

What is the 120 day rule for foreclosure?

The 120-day rule for foreclosure refers to a requirement in some states that lenders must wait at least 120 days after a borrower defaults before initiating foreclosure. This gives the borrower time to catch up on payments or seek alternatives, such as loan modification or short sale. However, specific rules can vary by state, so it's essential to check local laws for details.

What happens when someone defaults on a second mortgage?

When someone defaults on a second mortgage, the lender may begin foreclosure proceedings on the property. This can lead to the property being sold at auction. If the sale does not cover the full amount owed on the second mortgage, the borrower may still be liable for the remaining balance, potentially resulting in a deficiency judgment.

Can I stop a foreclosure by paying the past due amount?

In many cases, paying the past due amount can stop a foreclosure. Lenders often allow borrowers to reinstate their loan by bringing it current before the foreclosure sale. However, this may not apply if the foreclosure process has progressed significantly. It's crucial to act quickly and communicate with your lender to explore your options.

What happens when a 2nd mortgage forecloses?

When a second mortgage forecloses, the lender can take possession of the property and sell it to recover the debt. This process may occur even if the first mortgage is still active. If the sale does not cover the total amount owed on the second mortgage, the borrower might still be responsible for the remaining balance, known as a deficiency.