What is a junior lien holder?

Asked By: Aurimas Crofts | Last Updated: 16th February, 2020
Category: business and finance bankruptcy
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Many people carry second mortgages or Home Equity Lines of Credit (also called HELOCs) on their homes. The holders of these secondary liens are referred to as “junior lien holders,” because they are junior to the first existing mortgage.

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Also asked, what is a junior lien?

A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages.

Also, what is lien position? Lien position, also called lien priority, is the order of seniority in which the law recognizes lenders' claims against a property. It determines the sequence of who gets paid in the event of a foreclosure.

Also to know, can a junior lien holder foreclose?

Legally, all property lien holders can force a property into foreclosure, regardless of their seniority on property titles. It's much harder for a second mortgage lender to foreclose, however. That's because senior lien holders are paid first, with junior lien holders sometimes left with no sale proceeds to claim.

Is a lienholder an owner?

A lienholder (also known as a lienor) is a person, company, or financial institution that co-buys that property or sells it to you on credit. But as long as the lienholder has a financial stake in your vehicle, they're the legal owner, and their name will appear on important documents.

39 Related Question Answers Found

Do you lose everything in a foreclosure?

It's a common misconception that you must leave the property when foreclosure starts, but in fact you can stay in the home right up to the foreclosure auction. The actual foreclosure may take several months from start to finish. No one can remove your personal property from the residence while you still own it.

What is a junior mortgage?

What Is a Junior Mortgage? A junior mortgage is a mortgage that is subordinate to a first or prior (senior) mortgage. A junior mortgage often refers to a second mortgage, but it could also be a third or fourth mortgage (e.g. home equity loans or lines of credit (HELOCs)).

What does second lien position mean?

Second-lien debt refers to the ranking of debt in the event of a bankruptcy and liquidation. In other words, second-lien is second in line to be fully repaid in the case of the borrower's insolvency. Only after all senior debt, such as loans and bonds, have been satisfied can second-lien debt be paid.

What happens to second lien holder in foreclosure?

Following a first-mortgage foreclosure, all junior liens (including a second mortgage and any junior judgment liens) are extinguished and the liens are removed from the property title. But the second-mortgage debt and creditor's judgment remain, even though they're no longer attached to the foreclosed property.

What happens when you pay off first mortgage but still have a second?

This is certainly possible, but once you pay off your primary, your secondary loan will take first position. Basically, the second mortgage holder allows the new lender to pay off the primary mortgage and jump ahead into first position, leaving the second lender in a subordinate position.

What does 1st Lien mean?

A first lien is the first to be paid when a borrower defaults and the property or asset was used as collateral for the debt. A first lien is paid before all other liens. A bank that holds the first mortgage on a property has the first lien.

What is first and second lien?

In a second lien loan transaction, the second lien lenders hold a second priority security interest on the assets of the borrower. Typically, the first priority lien debt is a senior working capital facility, usually consisting of a revolving loan facility, sometimes coupled with a term loan facility.

What is a junior loan policy?

The ALTA Residential Limited Coverage Junior Loan Policy provides defense costs as stated. It also insures a later owner of the debt secured by the insured's mortgage. This Policy is designed to be issued before the Junior Mortgage is executed.

Can your second mortgage foreclose on you?

A second-mortgage holder can initiate foreclosure proceedings even if the first mortgage is not behind on payments. The second-mortgage lender must still take all the necessary steps in the foreclosure process, and must also notify the first lender of the intention to foreclose on the property.

Is your mortgage considered a lien?

What Is a Mortgage? In terms of modern real estate transactions, a mortgage is the lien you give against your property as security for money you borrowed. This creates what's often known as a "mortgage lien," which is specifically the lien on your property that secures the debt created by the mortgage loan.

Can 2nd mortgage be discharged?

The second mortgage (or other junior lien) you strip is treated as a nonpriority unsecured debt when you file your bankruptcy. However, the second mortgage lien will not be removed from your house until you complete your plan and get a discharge.

What happens to a lien when the lien holder dies?

When the lien holder dies, the lien is transferred along with other assets to his heirs. If a specific heir is not designated, the lien will transfer to the deceased person's estate. The lien does not disappear upon the lien holder's death.

Who can put a lien on your house?

Real Property Liens
Once a person's property is discovered, a judgment creditor can take action toward the property. He or she can place lien against the real property that the debtor owns. Some states will automatically impose a lien on the judgment debtor's property once the judgment is secured.

What happens if you buy a house with a lien on it?

Even if the debt exceeds the property value, you can still sell a house with a lien on it. You don't have to pay these settlements before closing—liens against houses can be paid in multiple ways. Traditionally, a seller will pay these debts at closing where the debts are deducted from the proceeds of the sale.

Can bank owned properties have liens?

A bank-owned or real estate owned (REO) property is one that has reverted to the mortgage lender after the home fails to sell in a foreclosure auction. Once the bank owns the property, it will handle eviction (if necessary), pay off tax liens and may do some repairs.

How do I pay off a lien on my house?

Property lien removal process
  1. Make sure the debt the lien represents is valid.
  2. Pay off the debt.
  3. Fill out a release-of-lien form.
  4. Have the lien holder sign the release-of-lien form in front of a notary.
  5. File the lien release form.
  6. Ask for a lien waiver, if appropriate.
  7. Keep a copy.

Who is responsible for liens on a foreclosure?

The current property owner is responsible for payment of taxes incurred during the time he owns the property. However, unpaid taxes remain a lien on the property regardless of who is on the title. If you want to avoid tax foreclosure, you must pay all outstanding real property taxes when taking ownership.