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  1. #1
    Join Date
    Jul 2019
    Posts
    1

    Default Bank Foreclosure and Competing Liens

    My question involves real estate located in the State of: NY

    I'm looking at purchasing a house at a Bank Foreclosure auction, held on the county court steps. I paid for a title search and it shows that a bank loan is outstanding, hence the foreclosure process that was started by them. There is another lien on the property that is from the Department of Social services, a county entity -- the original owner was in a nursing home during his final days. On the report it is called a Medical assistance lien. Will this lien become extinguished after the auction or does it transfer to the new owner? I'm guessing that sale price will be enough to cover the mortgage and not much more. I have no idea how much the medical assistance lien is for, because it says "$1+", which could mean anything. Thanks for any help that you can give!
    Aaron

  2. #2
    Join Date
    Sep 2010
    Posts
    19,000

    Default Re: Bank Foreclosure and Competing Liens

    The mortgage (presumably) is the senior lien to the medicaid one (they don't get the jump in priority that a tax lien would). It should be extinguished by the foreclosure. Note the lender can usually be counted on to bid as much as they have in the property.

  3. #3
    Join Date
    Nov 2013
    Posts
    6,222

    Default Re: Bank Foreclosure and Competing Liens

    I do not believe you are correct in saying that a medical assistance lien is going to be extinguished by the foreclosure. According to OP's post, the dollar amount of the lien has yet to be determined. And it would be junior to the any mortgages and other liens (including judgment liens) that have been recorded depending on the dates the liens were recorded.

    The medical lien on the property may have been recorded within days of the person entering care. Thus, unlike a tax foreclosure, the lien holders are paid off in the order of seniority of the recorded liens. No lien is extinguished. When the proceeds run out to pay the lien holders, they run out.

    So if you mean to say that the proceeds do not cover all liens on the property that is one thing. But to say the medical assistance lean would be extinguished is not exactly correct.

  4. #4
    Join Date
    Sep 2010
    Posts
    19,000

    Default Re: Bank Foreclosure and Competing Liens

    Eh, this is not the first time you have said this, but it isn't true, at least not in New York. The lienholders are paid in order of priority from the sales proceeds but, satisfied or not, the liens are extinguished by the action.
    What doesn't happen is the debt itself is eliminated. The lender can still pursue a judgment against the borrower for the unpaid moneys, they just don't have the security of the lien. The wording is a bit convoluted but the rule is in the NY RPA 1352. To paraphrase, if you have a subordinate (junior) interest and you let it go through foreclosure and past the redemption period, you lose your right to act on your liens.

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