Example Scenario 1
- mortgage foreclosing = 1st mortgage
|
| 1st Mortgage (Bank of America) |
$500,000*** |
| Mortgage (Washington Mutual) |
$100,000 |
| Opening Bid |
$520,000 (includes arrears, delinquent taxes*, attorney and misc. fees) |
| No Bidders |
the property automatically reverts back to 1st mortgage beneficiary (Bank of America) as an REO. All junior liens (Washington Mutual) are wiped out/eliminated. Bank of America now owns real estate with a clean title (free from any liens = a.k.a. REO). |
| Washington Mutual Bids (only) |
a winning bid $520,000 (they decided to cover their position by bidding at the auction). They are now the vested owner of the property. Washington Mutual now has $620,000 invested into the property. Note: if there were any more junior liens they would be wiped out/eliminated (i.e. 3rd mortgage, 4th mortgage, etc.) |
| 3rd Party Bid (only) |
a winning bid $520,000
This party is now the vested owner of the property and all junior liens are wiped out. Washington Mutual decided not to cover their position and therefore was wiped out/eliminated at the auction. |
*** Denotes mortgage foreclosing
* Delinquent Taxes — these fees may not be included in opening bid. Therefore, winning bidder must be prepared to pay these delinquent taxes in addition to their winning bid
Example Scenario 2
- mortgage foreclosing = 2nd mortgage
|
| 1st Mortgage (Bank of America) |
$500,000 |
| 2nd Mortgage (Washington Mutual) |
$100,000*** |
| Opening Bid |
$110,000 (includes arrears, delinquent taxes*, attorney and misc. fees) |
| No Bidders |
the property automatically reverts back to 2nd mortgage beneficiary (Washington Mutual) as an REO. Washington Mutual's foreclosure is unsuccessful recovering the full amount owed at this auction. They now have the option of reinstating or paying off the 1st mortgage with Bank of America.
Note: If WAMU does not reinstate 1st mortgage, Bank of America will take the property to foreclosure (see scenario #1), forcing WAMU to payoff the 1st mortgage completely or risk being wiped out/eliminated. |
| 3rd Party Bid (only) |
a winning bid $110,000
This party is now the vested owner of the property and is responsible for paying off the 1st mortgage with Bank of America; including arrears, attorney fees, etc. |
*** Denotes mortgage foreclosing
* Delinquent Taxes — these fees may not be included in opening bid. Therefore, winning bidder must be prepared to pay these delinquent taxes in addition to their winning bid
Example Scenario 3
- mortgage foreclosing = 3rd mortgage
|
| 1st Mortgage (Bank of America) |
$500,000 |
| 2nd Mortgage (Washington Mutual) |
$100,000 |
| 3rd Mortgage (Wells Fargo) |
$25,000*** |
| Opening Bid |
$32,000 (includes arrears, delinquent taxes*, attorney and misc. fees) |
| No Bidders |
the property automatically reverts back to 3rd mortgage beneficiary (Wells Fargo) as an REO. Wells Fargo's foreclosure is unsuccessful in recovering the full amount owed at this auction. They now have the option of reinstating or paying off the 1st and 2nd mortgage.
Note: Wells Fargo only needs to reinstate 1st and 2nd mortgages if they are delinquent. Remember, if the 1st and/or 2nd mortgage becomes more than 90 days delinquent this could trigger a Notice of Default being filed, thus beginning the foreclosure process. Therefore, Wells Fargo is responsible for making sure payments stay current on the 1st and 2nd mortgage until they sell the property, otherwise their position could be in jeopardy of being wiped out/eliminated from the 1st or 2nd mortgage going to auction. |
| 3rd Party Bid (only) |
a winning bid $32,000
This party is now the vested owner of the property and is responsible for paying off the 1st and 2nd mortgages, including their arrears, attorney fees, etc. |
*** Denotes mortgage foreclosing