MORTGAGE IS NOT AN OBLIGATION TO PAY - COMMON MISTAKEN ADVICE BY AGENTS

Thanks Richard.

Question for my own knowledge.... In a foreclosure resulting in an unsecured second promissory note, as this is no longer secured by real property, could this be set aside in bankrupcy court?

PS - I believe Ken (#27) has the sequence right.

Absolutely right! I run into this all the time when discussing short sales with people. They think 'let the banks foreclose' - then they can't come after me. There is foreclosure for the first, but there is breach of contract for junior lienholders. Just because the security is gone doesn't mean the debt is no longer due and payable. 

Great, easy to understand post.  I think we've all been through this in classes and just forgot it, as someone else said.  I always instruct my clients to engage the services of an experienced real estate attorney at the beginning of the short sale process.

Thanks

Hi Richard,  Very well  written and presented post.  The advice to refrain from giving legal advice cannot be overstated.

Richard - I'm so glad we have you here on this platform.  You really explained it very well, so everyone can understand.

Thanks for the concise clarification! I think it is a commonly-held belief that the debt to the 2nd lienholder is wiped out during a foreclosure through the 1st. Like Lenn said, following foreclosure is often a bankruptcy; or the bankruptcy trustee handles the sale themselves to wipe both of the liens out. Having a real estate attorney on board is crucial when working short sales--it's clearly part of my short sale listing package!

Since the answers to so many questions clients ask border on or step over the line between real estate and law there can be only one conclusion for the cautious agent.  Attend mime school and incorporate your learnings into your real estate activities. 

Another timely and excellent post, Richard.  Thank you.

Mortgages, promissory notes and cows without tails - my favorite 3 dinner party conversations topics.

Great explanation of all this. There is so much mis-information distributed out there by people that should know better.

Spelled out well. No excuses now for anyone.  You've told it like it is!

Richard - This is an important distinction for borrowers to understand and a well-written explanation.

It seems simple enough, but most people do not understand.  I think you made it easier for agents to comprehend.

Richard,

Really loved this "cow and tail" explanation. Not only true, but so much fun. For as long as we understand which is cow and which is tail - LOL 

Great information Richard and very interesting stuff.  Wish we could re-blog this one.  

Thank you for the great information.  You made this sometimes confusing issue very easy to understand.

Thank you for explaning that so clearly.

Well put.  Thank you for posting!