Legal Question in Real Estate Law in Minnesota
Foreclosure on Land with CD - 2nd Mortgage in default
My Dad sold some property in Minnesota on a CD. He has 1st mortgage with this CD. The purchasers of this land took out a 2nd mortgage, which is now in default. The bank (a local bank) is foreclosing on the property (no improvements have been made on the land). The terms of the CD indicate quarterly payments to my Dad. They are 28 days behind on their last payment. The taxes are current, and to my knowledge, there aren't any other liens on the property. The balance on the CD, including interest is about 37K. The 2nd mortgage which is in default is about 42K. It was purchased 3-5 years ago at 60K. What should my Dad be doing to protect his interests?
2 Answers from Attorneys
Re: Foreclosure on Land with CD - 2nd Mortgage in default
To protect his interest, your father should keep the first mortgage current. The Seller's mortgagee can acquire the seller's interest, but the purchaser's mortgagee can only acquire the purchaser's interest through foreclosure. Therefore, if your father cancels the Contract due to the purchaser's default, the purchaser's mortgagee can potentially lose all interest in the property. Your father should consult with an attorney before attempting to cancel the contract, or regarding contacting the second mortgagee in an effort to have the defaulted contract reinstated.
Re: Foreclosure on Land with CD - 2nd Mortgage in default
Your dad may be able to re-take the property. The name of the method would be "cancellation". To start with the title will have to be checked, to be sure what players have what liens and in what order; and then a decision will have to be made about what next step(s) to take.
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