The Status Of Liens After Foreclosure
Homeowners sometimes take multiple loans that are secured by their homes. If the homeowner fails to make payments on the original mortgage, which is also secured by the home, the mortgage holder can foreclose on the home to satisfy the homeowner’s debt. While the foreclosure sale may take care of the mortgage loan, the homeowner is still responsible for the other loans to the other loan providers (known as junior lien holders) even after the foreclosure is finished.
Typically, after a foreclosure action, the home is sold and the funds used to pay off the debt of the foreclosing party. If there are any funds left over, the money is passed on to the homeowner. However, if there are multiple other parties with liens on the property, the excess money may be used to pay those loans off. Ultimately however, a foreclosure sale by a primary lien holder erases the liens in the home held by the other loan providers.
When the liens are erased, it means that the loan providers who held junior liens are not in a position to foreclose the property or seek compensation from the person who purchases the home in the foreclosure sale. The erasure does not mean that the junior lien holders are not able to collect the debt from the homeowner.
The junior lien holder can still sue the homeowner and try to get a judgment against the homeowner. If the homeowner fails to respond to the lawsuit, or has no applicable defenses to the lawsuit, the court will rule in favor of the junior lien holder. The junior lien holder may ask for an order allowing it to place liens on other property owned by the homeowner in order to collect the court judgement. Therefore, although the junior lien holder lost rights in the foreclosure, it can regain the rights in transferring the lien to another property owned by the homeowner in this way.
In some cases, a junior lien holder may buy the foreclosed home in the foreclosure sale to protect its interests. This does not affect the homeowner’s debt. The homeowner still owes the debt to the junior lien holder.
Contact an Experienced Foreclosure Defense Attorney
If you are facing foreclosure and you have multiple liens on your home, you may still be responsible personally for some of the loans even after the foreclosure is over. You may have a defense against the foreclosure, and a way to handle to additional loans. For more information, contact us at the law firm of Louis S. Schwartz, Attorneys at Law to speak to a Philadelphia foreclosure defense attorney.