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Old collection mortgage


CarolinaBlueEyes
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\I have a friend who I was helping sort through some tax records.. and I am confused by this one... she has three mortgages on her house.. however her second mortgage is not recorded in the deed books (which is how I guess she was able to get the third)... (I was looking at her interest for deductions..)

what gets me is this loan is nearly four years delinquent.. she owes over 30K on it and sends a little each month on it and says she gets calls from time to time but nothing has happened on it...

Her first and third are about 30K less then the house is worth however the second holder wouldnt even know about the other one (sorry I know this is confusing).. so if they based it on just her first they would beleive they had the equity to foreclose... but after four years would they even bother???.. I guess as long as she is sending something (she says at least half a payment and they cash it.. however I notice her balance is not going down but up due to fees is my guess.).... she said it had been sold at least four times.. the interest rate is about what a second would be.. I thought all companies foreclosed.. any clue on this one.. maybe with a second/third its not worth the time and money... I dont know. I need an education on this one .. any thoughts..

Also this company appears nowhere on her credit report (we pulled it I was curious)... the first one did (the company she wrote it with) but they are about to drop off but when it was sold so many times there is no reporting of this at all.... again.. lucky but odd...

what is the liklihood they would do anything if she kept making payments.. she asked me this.. I searched the net and didnt get any definate answers.. so I am asking the experts :)

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If there is no mortgage lien against the deed, then they can't forclose at all, the loan is not secured by the property w/o the lien. If she were to file bankruptcy, the lack of a recorded lien could be a big problem as her equity would be much higher.

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It's unlikely that a second mortgage would have been funded unless the mortgage had been recorded. So I think the likelihood is that the mortgage is recorded, but that some defect in the recording is preventing it from appearing on a records search.

The holder of the third might be able to scream fraud if the friend were ever to go into default ... or not.

The holder of the defaulted second might be able to do some fancy dancing in court to retain/restore their priority as a second lienholder ... or not.

The holder of the second mortgage may know of the defect ... or not. And that may be affecting their decision to keep accepting whatever payments the friend is sending ... or not.

There are a lot of variables/unknowns here.

If I had a crystal ball of omniscience, I might learn that the company that issued the second learned that they had a recording defect that was not easily remediable, and that they sold the loan ... and the loan has been subsequently passed around like a party joint because (1) it has the defect; and (2) it does perform a little. The last holder of the hot potato when and if the final decision is made to stop accepting payments and pursue court remedies will have to figure out how to restore priority over that third.

It certainly might be a big mistake to pay that third off before wrangling the second into shape. The existence of the third is probably deterring any coercive collection actions on the second.

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thank you ... both these posts are very helpful..

well the third is listed as the second on her CR.. the lien is not recorded at the courthouse anywhere... also the company that wrote it when bankrupt two years later.. they were called out on some bad loans those 125% loans that were popular in the 90s...

As to Lady in Reds comments.. they dont have a lien on the property recorded but if she signed a deed of trust (she can't remember) can they just not show up with that at anytime.. and again.. nothing on her credit report except the original company... which comes off next year.l.. thanks again gang

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There was a program (whose name I don't recall) where small amounts were lent to low-income homeowners to fix up their homes.

The system got badly abused by sharp operators ... and IIRC, one of its hallmarks was a security interest in the home that went unrecorded for some technical reason. I'll see what I can find out to supplement my failing memory.

That "second" may actually be one of those critters...

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www.responsiblelending.org ... They are an advocacy group out of Durham ... and D.C. ... they fight all sorts of bad lending industry practices ... part think-tank, part grassroots advocacy ... I bet they could help.

I think you've got a Title 1 loan situation. The "third" really is the second ... but the paper on the second may have features that would overried, for instance, a state's homestead exemption laws (even though it's not a recorded mortgage). The loan probably started out under $7,500 and has now ballooned to the $30k or so figure due to fees, etc.

Was there any kind of settlement given to your friend when the first loan company went under? I'm thinking perhaps the "owners" of this "debt" don't take her to court because if she got an attorney who looked into the real status of the loan it would get thrown out in a heartbeat.

So whoever's got this invalid loan perhaps bought it for pennies on the dollar and is just collecting gravy so long as she keeps paying, with the possibility waiting in the wings of getting deeded the house with a little equity over and above the first and the second if she gets too far behind and they're able to intimidate her into quitclaiming...

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