What happens if a homeowner who is about to go into foreclosure takes out another loan, or lien is put on the?

Question

home a day before, or the day of the auction? Would that then get passed on to the highest bidder, who was oblivous to the fact? Or must all leins/loans be recorded a certain amount of time prior?

Answer 1

Anyone that buys the home prior to the foreclosure sale would be smart to run title search and pay for title insurance so that are protected against any future claims on title. However at the auction the highest bidder purchases the property free and clear of all other liens. This is why 2nd mortgages are so much more money because there is always a chance that at the court house auction the bid is insufficient to return invested monies.

Answer 2

There's no chance that someone in that situation would ever get a loan anyway so it would be a moot point. However if they did, it would be junior to the existing loans and would be unrecoverable by the lender as the foreclosure of the superior loan would render it uncollectible. The lender making the loan would have to bid on the auction and win to protect their interest.

Answer 3

Liens can be placed at any time. However, anyone with a home in foreclosure will not only have too bad of a credit rating to qualify they will also not have any equity to borrow against, so a loan will not be happening.

Answer 4

The people signed a contract, they were not forced to sign it. When the bankruptcy changed the banks took advantage, our system is built on checks and balances. Remove one and the system goes out of kilter. Which is what we now face. There is blame for the people, the government and the banks. Still I bought a house that I could afford at a fixed rate, who is going to help me out? I am far from rich and live in a very moderate home. In fact many people think my house is small.

Answer 5

Yes, all liens, and loans, must be recorded. If they are in forclosure, Anyone making the loan would know it.