If your house is sold at a sheriff’s sale, what can the second mortgage holder do?

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If your house is sold at a sheriff’s sale, what can the second mortgage holder do?

First mortgage lender put the house up for sale on the courthouse steps. Lender ended up buying the house for more than what was owed. Now, months later, the second mortgage holder is looking for restitution for the uncovered loan balance.

Asked on July 18, 2011 under Real Estate Law, Indiana

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The answer to your question depends on whether the second mortgage holder's position was a purchase money loan when you bought the property. I presume that the second mortgage holder is looking at you to pay for its loan that was wiped out by the first mortgage's sheriff's sale on the home. Am I correct?

If the second mortgage was used solely in conjunction to your purchase of the property (was not a refinance loan) and was placed at the same time/date as the first mortgage when the home was purchased by you, then under the laws of most States in this country, the foreclosed second mortgage holder due to the "purchase money" aspect of its loan has no legal recourse to go after you for it.

However, if the second mortgage was not "purchase money", in most States you could be liable for what was lost by the first mortgage's foreclosure on the property.


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