In a Battle of Foreclosure Actions, Adam Leitman Bailey, P.C. Successfully Leads Second Position Mortgage Lender to Win the Race to the Auction, Resulting in Full Payment
A highly desirable residential condominium unit was the subject of two competing foreclosure actions. ALBPC was retained by the second position lender to commence foreclosure proceedings and also to defend the lender’s interest in the first position lender’s foreclosure action.
The first mortgage entered into a modification agreement with the borrower whereby it increased the principal balance on the loan by 63%. ALBPC argued that a senior lienholder is not permitted to modify the terms of a mortgage without the consent of a junior lienholder, if that modification prejudices the rights of the junior lienholder. The additional sums would prejudice the second position lien holder, because it would reduce its secured interest in the subject property. Therefore, ALBPC argued that the new money should be subordinate to the second position lender’s mortgage.
The Court fully adopted ALBPC’s argument and subordinated the first position’s lender’s new money. However, the first position would not relent from this issue and it was re-litigated multiple times, each resulting with the Court affirming that the new money was subordinate to the second position lender.
ALBPC was able to beat the first position lender to get Judgment of Foreclosure and Sale, and to schedule a foreclosure auction.
Even though the first successful foreclosure bidder failed to close on the property, ALBPC was able to schedule a new auction and complete the sale to the second successful foreclosure bidder all before the first position lender was awarded judgment of foreclosure and sale.
The first position lender tried to hold up ALBPC’s sale by giving the purchaser a payoff statement that did not omit the new money. After motion practice before the Court, the Court required the first position lender to provide an updated payoff statement which included the subordination or face sanctions. The first position lender acquiesced, and at the closing the purchaser paid off the subordinated first position mortgage, and fully paid off ALBPC’s client’s second position mortgage.
Jackie Halpern Weinstein, Esq., and Danny Ramrattan, Esq. of the Foreclosure Litigation Group at Adam Leitman Bailey, P.C. secured this result for its client.