A California property has a first deed of trust for $300,000 and a second deed of trust for $75,000. The borrower defaults, and the second deed of trust holder initiates non-judicial foreclosure. What is the effect on the first deed of trust?
Correct Answer
A) The first deed of trust remains in place and the buyer at the trustee's sale takes the property subject to the first deed of trust
When a junior lien holder forecloses, senior liens remain in place. The buyer at the trustee's sale acquires the property subject to the first deed of trust. This is why bidders at junior lien foreclosure sales must account for the outstanding senior debt.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
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