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I am one of 4 private lenders who hold a mortgage on a residence. 3 of 4 lenders want to foreclose.

Hi, I am one of 4 individual lenders who hold one mortgage on someone's primary residence.  (It was a personal loan secured by a note and mortgage on his house).  It is recorded.  Of course, he defaulted on the mortgage.  3 out of 4 of us want to foreclose. can we foreclose by majority?  How?  Thank you so much in advance. 
  • May 13 2009 - Pottsville
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Answers (16)

The buyer is in default. I would think you could file without having a "vote" but this is something I'd be asking an attorney, not posting on a website for free advice.
  • May 13 2009
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Hi Doug,

Thanks for your response. Actually, I am an attorney, but I do not practice real estate law.  The reason I came here is because I feel that real people have probably experienced this and can point me in the right direction.  I need to file the foreclosure action myself and I am just looking for some pointers.  It is an unusual situation and somewhat sticky so I was just wondering if anyone has any experience with multiple lenders on one mortgage.  Everything is geared towards institutions lending to individuals.  Thanks for your help.

Sarah
  • May 14 2009
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Do each of the 4 hold diferent positions or is this a 1st Trust Deed that was Fractionalized between all 4?
  • May 14 2009
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Well, I don't know what a 1st Trust Deed is, but, to answer your question, each of the 4 of us loaned different amounts of money with the one who loaned the most being the one who doesn't want to foreclose.  The other three of us together loaned, all together, more than the other one did.  We are listed as the same on the note and mortgage and in fact, it doesn't state the individual amounts loaned, just the total and the interest rate.  Did that answer your question?  One loaned more, but we are all in the same "class" as it were.  Thanks so much!
  • May 14 2009
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You've got a homemade toxic asset. First I've heard of one of those. That's creative. You should be CNBC.
  • May 14 2009
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The question is, how many liens are on title?  Is there one lien, which all four of you own in proportion to your contribution, or are there 4 liens?
  • May 14 2009
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There is one lien.  The four of us own in proportion to our contribution. 
  • May 15 2009
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Sarah,

If you are an attorney you would think that you would have thought you would done a little more homework before extending a loan.

Did you record a mortgage in addition to the note?
  • May 15 2009
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Then the vote is among yourselves.  If you incorporated for this deal, then the articles of incorporation show who has what voting percentage.  Majority wins.  If not, you probably want to work out some sort of vote based on percentage of ownership, and again, if a majority of the consortium wants to foreclose, then you're going to file a notice of default with the requisite recorder's office, and start foreclosure proceedings.

If there's only one lien, this isn't a complicated deal.  All the wrangling goes on before the default is filed, among the investors.  Now, if there had been four separate liens, THEN you would have had a serious mess.
  • May 15 2009
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Chris, thank you for your reply, I really appreciate it.  I know it's a crazy situation.  I figured I would send a notice of intent to foreclose on behalf of the three of us who want to and then when he doesn't cure it, File a foreclosure action and let the judge handle it.  They will file all sorts of objections and what not to it, it will just give us an opportunity to get in front of the judge.  I just didn't want to start out with an action that was defective on its face.  Thanks again for your help.
  • May 15 2009
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My pleasure.  Just make sure all the investors are on the same page with what's going on, or you'll have lawsuits there as well.

Good fortune to you.
  • May 15 2009
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Sarah, you received good advice from Chris.

This should be majority rules. Three vs one. With the three having more at stake in total. Alrhough, it seems you did not have a servicing agreement between the four of you. This still may cause the three of you problems if the fouth person wants to play hardball. Although, in the end, I  think the fourth person's only other option if not going forward would be to buy out the three of you. .... Best wishes, Rudi
  • May 15 2009
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Thank you, another good point re: the buyout!  Thanks Again!
  • May 15 2009
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Welcome Sarah. ..... Not that I'm begging. There's a Hand with a Thumbs Up with a Tad of Green on the Right Side. How about clicking on that for us? ..... Thank you, Rudi :>)
  • May 16 2009
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I am still wondering if a mortgage was signed...Not sure you can foreclose with out it!
  • May 16 2009
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if it is a consumer transaction, you have to provide the Borrewer with required notices.  After that, you and the other two lenders can proceed with the foreclosure.  Your success also depends on the language of the note and the mortgage. Contact me if you have any questions.
  • June 07 2009
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