Deed in lieu of foreclosure: What happens to 2nd?

[seniorjudge]

What is the name of your state (only U.S. law)? Missouri

What happens to a second deed of trust when the mortgagee of the first accepts a deed in lieu of foreclosure?


I should know the answer but don't. A person borrowed money from me and I took a second. The person paid me back and the deed of trust has been released. All is well.

However, I need to know this for future transactions.

My answer is that nothing happens to the second. It's still there and is still a lien on the real estate. In fact, after the deed in lieu of foreclosure, it's a first.

Am I right?

 

[HUD-1]

A DIL cannot go thrugh unless the recorded seconds have been taken care of, either though payoff or write-off.

 

[nextwife]

It's not a first until/unless the 1st mtg is released. That is not always done until the first actually sells the REO.

The first mtg lender cannot SELL or dispose of the property without paying off the second. Of course, if the second is in default, the jr lienholder can foreclose on their loan, but they would need to payoff the Sr lienholder.

As someone who works in a bank and handles jr and sr default loans, I can tell you we will NOT accept a DIL unless we get the JR lienholder to agree to a nominal settlement to release the real estate. Usually about $1000.00 which is less than the cost of foreclosing.

 

[seniorjudge]

Thank you for your answers!

 

[HomeGuru]

Thank you for your answers!

**A: hey, where you been?

 

[Good Deal]

NOTHING happens to the second

it remains the second...only the owner of the property changes hands...a good way to get the holder of your first to pay off your second for you !

Usually, holders of firsts will refuse a deed in lieu under those circumstances..remember you might record it, but unless they ACCEPT it, the deed is not effective because delivery would not have been perfected.

 

[Good Deal]

..and it does NOT move into first position

..ir stays a second..the first has to reconvey to be removed of record in order for a second to drop automatically into first position....

 

[Good Deal]

hey wife..sconds get wiped out when first's foreclose

at least their security interest is terminated, leaving them unsecured

 

[justalayman]

at least their security interest is terminated, leaving them unsecured

they aren't talking about a foreclosure. They are talking about a deed in lieu of foreclosure. Big difference.