Foreclosure Auction for 2nd Mortgage-now what?

[txmomof2]

What is the name of your state? Texas

Ok- Bought my house through USDA Rural Housing Service in October 1994. Got 2nd lien on house for improvements in March 2002 (which I think may have been done wrong, due to equity).

Got behind on 2nd Mortgage this year. They returned payment to me in May 2005, stating to pay ALL past due ($630) plus that payment or risk foreclosure. I called them to work something out, as I didn't have that money just 'laying around'.

No deal. They send atty letters giving std 21 day notice. Set auction date as July 5th. I was still in house- I found a place to go, but was hoping to work a deal to stay until August 1st if necessary (pay rent, whatever). House did not sell.

Auction reset for August 2nd. Apparently house has sold (or 2nd lienholder has assumed deed)....I moved out July 21st. House has not yet been padlocked or anything.

I'm curious as to what happens next. USDA will foreclose next. When that happens- how do they handle the 2nd lienholder (USDA is no fun in dealing with when it comes to trying to refinance - I tried- or sell -tried that too-)?

Is there anything I can do at this point? If the 2nd lienholder tries to sell the property themselves then they deal with USDA, correct?

 

[mdcsoft]

Similar Thing in NH

We had a similar situation here in New Hampshire earlier this year. A couple I was trying to help had two loans. 1st was with USDA and a 2nd with Countrywide.

Countrywide foreclosed and no one bid at the sale. So they ended up getting the deed to the house. They then did absolutely nothing. They didn't evict the borrowers or anything. This was November 2004. Well, the folks stopped paying on their USDA 1st.

April 2005 rolls around and the USDA finally takes some action. The couple called me to help at that point. A quick title search revealed the story as I have just described it. They no longer owned the house. Countrywide did. So nothing this couple did could stop the sale. They were merely tenants.

We tried a number of things. We tried to get the USDA to sell us their position. The guy handling the loan was willing, but then told us he wasn't allowed to do so -- something weird about gov't loans. So we went to Countrywide. Would they simply deed us the property? Nope.

Instead, Countrywide paid off the USDA loan in full, some $120k, to protect their lousy $30k position. Then Countrywide went ahead and evicted the former owners, hired a realtor, and sold the place.

So if your situation is similar, and it seems to be, you could wait months for something to happen. Your 2nd lienholder will definitely have to pay off the USDA loan, no question about that. If your 2nd happens to be Countrywide, don't be surprised if things play out exactly like my story above.

As for whether or not there is anything you can do, I don't see anything at this point, unless Texas is a redemption state. I don't believe it is. Good luck and let us know how it plays out.

 

[txmomof2]

Interesting

Wow- thanks for the reply- I've searched all over trying to find something even remotely similar.

I emailed USDA the other day and turns out, they were never even notified of the foreclosure by the 2nd lienholder (I guess they are supposed to be?)- so the woman from USDA goes on about the fact that I didn't have to move, etc- then stated that she'd check into it.

Couple of days later, she emails me back to tell me that the 2nd lienholder has requested payoff information- and has to get an appraisal on the property.

I guess that means they are considering paying off USDA which would be WONDERFUL for me. Wouldn't it? Because the way I understand it, with USDA being Fed Govt- if they get paid, then there won't be any Treasury offsets, etc.

Actually, the 2nd lienholder will make money off my house if THEY payoff USDA- the work they did wasn't even CLOSE to what they actually charged- they could sell my house for at least $16,000 over what USDA is owed- I couldn't due to the balances on BOTH loans.

Thanks again for the reply.

 

[mdcsoft]

In order for the 2nd to get clear title, they will have to pay off the USDA, yes. Whether or not that's good for you depends on your point of view, I suppose. Do you care about continuing to live there, or are you just hoping you won't owe the USDA any money? If it's the latter, then I'd say you're all set. If you want to keep the house, that's not going to happen. If you want to try to keep the house or try to get some of the equity you think the 2nd will end up getting, click one of the links below and send me an email. I might have an idea.

 

[Happy Trails]

In order for the 2nd to get clear title, they will have to pay off the USDA, yes. Whether or not that's good for you depends on your point of view, I suppose. Do you care about continuing to live there, or are you just hoping you won't owe the USDA any money? If it's the latter, then I'd say you're all set. If you want to keep the house, that's not going to happen. If you want to try to keep the house or try to get some of the equity you think the 2nd will end up getting, click one of the links below and send me an email. I might have an idea.

Mdcsoft, you need to remove you advertising from your post. It is a violation of the Terms and Conditions of this site.

Use of the Forums is subject to our Terms and Conditions which prohibit advertisements, solicitations or other commercial messages, or false, defamatory, abusive, vulgar, or harassing messages, and subject violators to a fee for each improper posting.....

 

[txmomof2]

Thanks

Continuing to live in the house is no longer my priority- I've already moved into a home owned by my mother.

I'm most concerned about not owing USDA anything- I know that USDA will take income tax refunds, etc if you owe them anything.

Also, can someone tell me what it means about a 'redemption state'? I'm just not sure.

I let go a long time ago of making any money off the house- even though I paid on it for almost 11 years. Due to the interest subsidy owed to USDA, I not only didn't have equity, but owed MORE than the original loan amt. What a screw deal.

Anyway, if 2nd lienholder gets payoff and decides to NOT payoff USDA, then I assume USDA will then foreclose- and that's a whole other issue.

I'm sorry I don't know much about all this- I've scoured the 'net for information, and just haven't been very lucky.

Is it too late to sign a deed over to USDA? Is that possible? I researched their online handbooks for information- but some of it is quite confusing.

thanks again.

 

[mdcsoft]

Mdcsoft, you need to remove you advertising from your post. It is a violation of the Terms and Conditions of this site.

Sorry about that. I have never seen a site that prohibits small unobtrusive links in the signature. I feel that it adds credibility to my posts to show that I'm not just some schmoe and that I really know what I'm talking about.

 

[Happy Trails]

Sorry about that. I have never seen a site that prohibits small unobtrusive links in the signature. I feel that it adds credibility to my posts to show that I'm not just some schmoe and that I really know what I'm talking about.

Okay. You can always put your qualifications in your profile or in your signature line---minus any links that may be considered a form of advertising.

 

[mdcsoft]

How's this for a sig? [Sorry to have detoured this thread so much]

I'm going to go back now and answer the original poster's last question.

A "redemption state" is one where you have the right to get the house back by paying all arrears, plus interest, for a certain period of time after the foreclosure sale. I don't think Texas is one, but could be wrong.

The only way I see you owing the USDA money is if the 2nd decides to let the house go to sale and the USDA sale doesn't fetch enough money to pay what you owe, plus legal fees, interest, penalties, etc.

If the 2nd goes ahead and pays off the USDA completely to protect themselves, then they will own the place free and clear and you'll be all set in that respect.

The situation we had with the USDA here in NH was the same as yours: 10+ years of negative amortization. They owed significanty more than when they bought it.

You asked whether it was too late to deed the house to the USDA. I'm going to have to say yes, as it's no longer your house. It belongs to the 2nd mortgagee now.

 

[Happy Trails]

Well, it's better, but you need to remove the outside link. Anyone who may want to contact you can do it through "Private Messages".

Otherwise, it appears you are still trying to promote yourself. (That is a violation of the Terms and Conditions.)

If you are truly here to help people, I would hate to see your membership terminated.