If my property was foreclosed on, what to do if proceeds were only applied to my first and not my second mortgage?
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If my property was foreclosed on, what to do if proceeds were only applied to my first and not my second mortgage?
I had a foreclosure in 2007 with an 80/20 loan. The first one is closed now and the second is still reporting. How can I get the second one closed? The property sold for more than the first mortgage was worth but they did not apply any of the first mortgage towards the second? Is that legal?
Asked on January 10, 2011 under Real Estate Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
You should retain a real estate attorney to help you resolve this, but the short answer is--no, it's not legal, when there the sale of foreclosed property yields more than the remaining balance on the 1st mortgage, to not apply the overage to the second mortgage. Of course, there are several caveats, which you need to be aware of before deciding to engage an attorney and pursuing a remedy:
1) Certain costs of the foreclosure process and auction may be taken out of the proceeds, so it may be the case that any remaining monies were used up by these costs.
2) It's possible there was more accrued interest than you were anticipating, which reduced what would be left over.
3) Depending on the terms of your mortgage, you may have been liable for the bank's legal fees.
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