"In trying to find out what was going on with the house, the paralegal for the attorney who did the foreclosure complaint told my RE agent that it is possible we could make an offer to the bank and they may sell it prior to the public sale."

The lender cannot sell something they do not own. So, whoever told you this is wrong. The only thing I can think of that 'may' make any sense out of that is if you were to make an offer to the current owner (defaulted borrower) & they went to the lender & requested a short sale.

"There is a second mortgage on the property."

If there is no foreclosure then that junior lien remains on the property. It can only be extinguished by the priority lender's foreclosure action. So, you'd take title subject to the second.

"Did I mention you have to bring a $10K cashier's check to bid?"

I've always set my bidder's deposit amount at approximately 10% of my appraised value. Does that sound in line to you?

"...we might be surprised that anything is better than nothing to them. Besides they will still be able to go against the debtors for the balance."

Well, right away let me say that you should be careful to interject logic where there might not be any! You are dealing with a lender who is fighting every step of the way against taking a loss. And, sometimes that leads them to making very illogical decisions. Especially true if it's a national lender.

That said, IF the second mortgage holder is a local bank or credit union they will probably deal with you. You will need to make sure you get a Release of Lien.

What's the incentive for the borrower to do this? Why would they not file BK? Under the circumstances it would be a cram-down.

Do you have any more info on the state of the default? It bothers me that somebody has said you can make an offer to the bank direct. That's just not true unless the bank already owns the property and then the issue of the second mortgage is mute because it's been extinguished by the foreclosure.

/tricia

It sounds like this house has not been foreclosed on yet, and October 30th is the auction date. Based on that scenario, there is probably a limit to what you can do about the second mortgage.

Time is not your friend in attempting to get a short sale on the second mortgage this close to the auction date. And getting to the decision maker can be a challenge.

Given that the first mortgage is close to market value, why not wait out until the auction? If bidding starts at close to market value, there probably will not be a mad rush on bids. The second mortgage will be extinguished by the foreclosure, unless the holder of the second mortgage decides to bid. If the market value is close to the amount owed to the first, that is unlikely.

Good luck!

Here's a short summary of foreclosure law in Maine:
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Maine Foreclosure Sale following expiration of Period of Redemption
Upon expiration of the period of redemption, if the mortgagor, or the mortgagor's successors, heirs or assigns have not redeemed the mortgage, any remaining rights of the mortgagor to possession terminate, and the mortgagee shall cause notice of a public sale of the premises stating the time, place and terms of the sale to be published once in each of 3 successive weeks in a newspaper of general circulation in the county in which the premises are located; the first publication to be made not more than 90 days after the expiration of the period of redemption. The public sale must be held not less than 30 days nor more than 45 days after the first date of that publication and may be adjourned, for any time not exceeding 7 days and from time to time until a sale is made, by announcement to those present at each adjournment. The mortgagee, in its sole discretion, may allow the mortgagor to redeem or reinstate the loan after the expiration of the period of redemption but before the public sale. The mortgagee may convey the property to the mortgagor or execute a waiver of foreclosure and all other rights of all other parties remain as if no foreclosure had been commenced. The mortgagee shall sell the premises to the highest bidder at the public sale and deliver a deed of that sale to the purchaser. The deed conveys the premises free and clear of all interests of the parties in interest joined in the action. The mortgagee or any other party in interest may bid at the public sale. If the mortgagee is the highest bidder at the public sale, there is no obligation to account for any surplus upon a subsequent sale by the mortgagee. Any rights of the mortgagee to a deficiency claim against the mortgagors are limited to the amount established as of the date of the public sale. The date of the public sale is the date on which bids are received to establish the sales price, no matter when the sale is completed by the delivery of the deed to the highest bidder.
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All that being said. We are at the point of the sale - it does not appear to me that the mortgagors (debtors for the rest of us) have any right that would allow them the ability to do a short sale and that would be what I was told by one person at the bank and two lawyers.

My agent called and after talking with another agent who claims to be some 20 year expert - says that if I buy it at the public sale, I will take it along with the subordinate mortgage. Silly me, lawyer and all, I read the above as saying that the purchaser takes the property free and clear of all interests of the parties in interest joined in the action. The second mortgagee is a listed party in interest.

So, to recap:

1. In Maine the mortgagee (creditor) must file a civil collection action and get a Judgment of Foreclosure, then the mortgagor (debtor) has 90 days to redeem the property. And within this period of 90 days presumably, you could probably do a short sale.

2. After the 90 days - it sounds like the debtor's lose their status as owners of the proprety, and the creditor can then sell the property at a public sale.

3. Even after the 90 days the debtor can pay the judgment and get the property back, but only at the discretion of the creditor/mortgagee. But it does not look like after that 90 redemption period passes that any short sale can be done.

4. At the public sale, the buyer takes the property free of any interest of the second mortgage so long as that second mortgagee has been listed as a party in interest in the original foreclosure suit and notice given to it.

I've about convinced myself to go ahead and order my bank check and show up - who knows the first mortgage may bid less than the foreclosure judgment, but I doubt that, seriously. :)

We decided to also go ahead and submit a purchase and sale agreement to the paralegal for the foreclosing attorney, simply because - we feel at the very least she has a fax number and contact at the bank - and if all the stars align properly - the right person at the bank will have our names and information that we want to purchase the property in case I don't buy it at the public sale.

I'm still on the fence as there are other considerations - we just don't want it to get caught up in the abyss of some large corporation. I still have some glimmer of hope.

MP

I thought the the lenders for not only second mortgage, but also first, are willing to take a certain percent off the load so you can buy it prior to the foreclosure. At least in FL. The lender 2nd mtg will negotiate for pennies on the dollar, knowing they lose 100% if it forecloses. But the first mtg will usually take approx up to 20%-30% off the loan balance if you negotiate well. You have to talk to the correct departments at the bank. These are called Short Sales.

Be prepared for a loooooooooooong process in dealing with anyone in a "short sale" department.

It took me over 2 solid hours yesterday *just* to find the right person/department to fax a contract to. The low-level phone answer-ers in the cubicles have to put you on hold while they figure out where to send the call. What was really fun was when they accidentally (or maybe on purpose) hung up on me, thereby causing me to have to call back, and wait for their "standard wait time" of 24 minutes. Twice.

Ugh.

Well I"m on my way to meet with an attorney who does a lot of foreclosure action - I'm hoping that her fancy firm also can ferret out who at the 1st mortgage company we can talk to - besides some young lady in a vast department, yet to be discovered.

I don't think buying off the second will be a huge problem - it's figuring out what to do about the first.

Since there's some division on whether or not we can do a short sale - or whether we need the owners to do it - or whether they can - thought we'd get some local legal advice.

Since the property is already set for public sale in two weeks - varying people have told us that the time for a short sale has passed... or not. Depending on who you talk to. Certainly don't even talk to a RE agent - as each one has a different opinion and so far, none have been actually correct.

Finding the right person at the mortgage company is really key toward getting this done. And that's been like trying to find a needle in a haystack.

MP

Who is foreclosing? The second or the first (or both)?
The second will be wiped out if the first forecloses, so they often have a decent incentive to 'make good' on the first and then foreclose on the owner.
This is the risk of holding a second. You MUST have the financial resources to remedy a default in the first and foreclose the second to preserve your investment.

If the second is foreclosing you WILL be subject to the first. Most lenders are wiling to take the chance (some will not invoke 'due on sale') if you have the cash to cover the second.

If the first is foreclosing watch out.