What to do if purchasing a home and old lien was found during the title search?

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What to do if purchasing a home and old lien was found during the title search?

We are purchasing a property that was foreclosed upon over 1 year ago and is currently owned by Fannie Mae. The title search located a lien from 2006 for a line of credit that was listed in the first position when the owner took it out. It was for $26k. The title company acts like they have been working on this for 2 months now. What exactly is the title company “working on”? Wouldn’t it be up to Fannie Mae to either pay or negotiate with the lien holder? We have already filed an extension for our closing, how long should we expect this to take?

Asked on February 13, 2011 under Real Estate Law, Arizona

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Do you have an attorney on this purchase?  If not, then I would get one or it may cost you much more than his fee.  Generally speaking the foreclosure of a superior lien terminates all subordinate liens on the property.  Is the line of credit from the same lender that issued the mortgage? Are you saying that the line of credit was superior and not included in the foreclosure?  Were they notified of the foreclosure?  These are all questions that need to be addressed.  The attorney can do that for you.  Money can be held in escrow at closing pending the determination but you need to have an attorney review the terms of your contract as to how this may effect your obligations.  Good luck to you. 


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