Q-In May, 1990, I purchased a house on assumption, without credit approval from the mortgage company. I assumed the mortgage from a home builder who assumed it as a trade from the previous owners.
In March, 1993, I sold the house on assumption to a married couple. Since they did not have enough down payment to purchase my equity position, I agreed to carry a second mortgage of $9,900.
The couple was late on their second installment to me. Currently, the November and October payments on the first mortgage are delinquent, and the mortgage company could foreclose on it at any time.
Terms of the second mortgage allow me to call the note should any payment be delinquent. Communication between the couple and the mortgage company has been nonexistent.
Do I have any recourse? What happens if the mortgage company forecloses? Are the selling and listing real estate agents liable?
A-In order to protect your equity, as represented by a $9,900 second mortgage, you need to make the delinquent payments on the first mortgage. If the buyer continues in default, the first mortgage lender will foreclose.
Once foreclosure action has started, your only option will be to pay the first mortgage in full plus attorney’s fees, foreclosure costs and interest. Once foreclosure is complete, your interest (the $9,900 second mortgage) is lost.
Contact the first mortgage holder and arrange to make the monthly payment. Simultaneously, you should provide the buyer notice of delinquency and your intent to foreclose for default under the terms of the second mortgage.
The importance of acting quickly cannot be overemphasized. Additionally, do not attempt to act without the guidance of a competent real estate attorney.
With regard to the listing and selling real estate agents, it is my opinion that they are without liability. Real estate agents are not guarantors of a buyer’s credit or performance.
Assumed mortgage woes
Q-I just received a notice from the company that held the mortgage on a townhouse I sold two years ago. The buyer assumed the mortgage. The company informs me that the loan is delinquent. Is there anything I should do, like get legal counsel?
A-Yes, obtain legal counsel. The fact that the buyer of your previous home assumed your mortgage does not automatically relieve you of liability for the mortgage. Unless the lender released you from the obligation to pay, you have a contingent liability. That is, if the buyer does not make the mortgage payment you may be obligated to do so.
Ultimately, if default becomes foreclosure and the home is repossessed, the lender will sell the home to recover the money lent (principal balance of the mortgage), delinquent interest, legal fees and costs of foreclosure. The problem arises when the resale price of the home is insufficient to repay the lender for all monies owed.
The lender may seek a deficiency judgment against your buyer who assumed the mortgage loan. In the event the buyer does not have sufficient resources to pay the deficiency, the lender may look to you for payment.
