Quote Originally Posted by JBMcB View Post
Normally, wouldn't the holder of the note have a lien on the property if it's in default? How did it get sold?

Also, when a property gets sold, if there are any outstanding debts on it, they are listed on the closing papers. If you are the buyer and they are still on there, you are responsible for them, period. If you made a deal to get rid of them with the previous owner, then they had better not be on there when closing, otherwise it doesn't really matter what the previous owner promised, because, legally, you are responsible. Property contracts and transactions are immune from verbal agreements, everything needs to be in the closing contract or it doesn't matter.
The lender does have a first mortgage lien on the property. The property is sold at a foreclosure sale and anyone can bid on it, but subject to the liens in place. If the first mortgage lender has the highest bid then it is sold to them and wipes away the junior lien holders. If the highest bid is less than the amount of the outstanding first mortgage, then the lender can go after the owner personally for the difference between the amount owed and the winning bid amount.

Whenever an owner has a foreclosure and then a lawsuit for the deficiency amount then other lenders are sure to notice -- and not in a good way.