Legal Question in Real Estate Law in Rhode Island

Re: Second Mortgage question in Rhode Island

You'll really need a reply from a lawyer licensed in Rhode Island to have a reliable answer to this question. As an attorney trained and licensed only on California law, I can only give you an unreliable guess. That guess would be somewhat as follows: (1) foreclosure on the first mortgage causes a sale of the collateral to the high bidder at the foreclosure sale. (2) In Rhode Island, the foreclosure sale is more likely to be "judicial," i.e. by court-ordered sale after some sort of judicial proceeding, perhaps a trial, possibly something more perfunctory, than by an out-of-court trustee sale. (3) The role of the court and judge MAY include making orders relating to the junior lienholders. (4) The buyer at foreclosure PROBABLY gets good title, free of the claims of the junior lienholders. (5) The junior lienholders therefore probably become unsecured creditors of the borrower/mortgagor.

So, technically, the second-position lender is not going to be "collecting on the (second) mortgage," because the mortgage is a security device; he's going to be collecting on a now-unsecured loan.

All of this is just surmise. There is an outside chance that Rhode Island law varies significantly from the national norms. However, I think it is safe to say that while the collateral may be wiped out by the foreclosure of the first, the liability of the borrower is not.

Re: Second Mortgage question in Rhode Island

Pursuant to Rhode Island (RI) Real Estate Law, when the first mortgage forecloses, the second mortgage is wiped out. If the purchase price at the foreclosure is higher then the amount owed on the first mortgage plus attorneys / lawyers fees and foreclosure expenses then the additional funds go to the 2nd mortgage holder. If there are still available funds then the surplus goes back to the borrower(unless there are judgments or liens)

If the real estate is forrclosed and the second mortgage is not paid in full then the holder of the second mortgage can still file a lawsuit seeking to cellect on the promissory note. This would become an unsecured debt.

Rhode Island does not have judicial foreclosure. I suggest that you consult with a Rhode Island & Foreclosure and Real Estate Lawyer / Attorney.

Re: Second Mortgage question in Rhode Island

It is a matter of Rhode Island law. That being said, the answer generlly is yes, but there are statutory exceptions such as in the case of purchase money 2nd (the loan is for purchase of the property or taken back by the seller.)