Posted by Ryan Blay on April 11th, 2012 in Foreclosure - Saving Your Home, Illinois, Legal, Mortgage Foreclosure Defense, Mortgage Modifications, Wisconsin
It’s hard enough communicating with one mortgage servicer. Anyone who has ever tried to get a loan modification, get approval for a short sale, or even deed the property back in exchange for avoiding foreclosure.
Can you imagine having two mortgages, with the same lender, and not being able to get the departments to agree on how to proceed?
Unfortunately, many homeowners across the country face that exact ridiculous situation right now. And it comes to its absurd conclusion in foreclosure filings. You see, when a lender forecloses, they need to obtain a clear right to take the property that trumps anybody else imaginable. So very often you see a case caption that reads:
Huge National Bank v. Joe Homeowner, unknown spouse of Joe Homeowner, a/k/a Jane Homeowner, unknown tenants, XYZ Condo Association, Credit Card Judgment Company, and Huge National Bank
What does that all mean? Well, Huge National Bank has a first mortgage on this property, let’s say for $200,000. They have to sue Joe Homeowner, since he’s on title to the property, he’s the owner on the deed recorded with his county. They may have to sue his wife, if he has one, because some states give spouses a 1/2 interest in their spouse’s property. They would have to sue a Condo or Homeowner’s Association that has an interest in the property. They need to notify any creditor that obtained a judgment for a debt (a credit card judgment, a judgment for an unpaid medical bill, a personal injury). And of course, the holder of any junior mortgage.
So why is Huge National Bank suing itself? Because it probably has a second mortgage for $50,000 that was either taken out at the same time as the first mortgage (usually referred to as an “80-20 loan” – 80% of the purchase was for the first mortgage, 20% for the second) or it bought the mortgage later from another lender.
The problem is that each department has different interests. The first lender wants to foreclose if you can’t pay, because that way they can get clear title and move forward with another buyer. They want to recover as much as possible on the loan. The second lender wants to do the same thing. They may have a higher rate of interest on the mortgage since second mortgages bear much more risk. They might even hire their own law firm to defend themselves against….themselves.
It sounds like a headache and a special case of the law turning common sense into logic games. You may be correct. But knowing this can help you determine how you want to proceed with both mortgages. If you have two mortgages fighting between themselves and refusing to help you, please contact us to discuss your options.