When a mortgage holder forecloses does it eliminate junior liens and hoa liens?

Answer 1

When anyone files a foreclosure all of the lien holders having liens on the property are named as parties to the lawsuit. Technically, they are named as defendants and required to assert the claim of their lien or lose it. They assert the claim by entering the action, then filing a cross claim in the lawsuit stating their claim against the property and the person or company that owes them the money. If a lien holder fails to assert its claim, it will lose its lien rights and potentially its contract rights.

If the original plaintiff, in your scenario, the mortgage holder does not name a lien holder, the foreclosure will go forward without that party, but the rights of that party will be preserved as the property will be sold subject to that lien, which usually result in that lien being in first place when it is sold/bought. If all of the parties were named, as is usually the case and they have stated their claim, the lawsuit will proceed. All parties that have proved that they are owed money and that they have a valid lien will proceed to the foreclosure sale.

Assuming that all lien holders were named, when the property is sold, it will be sold free and clear of all liens. The key to your question is, "how much did the property sell for relative to the amount of the liens?" Once administrative fees and court costs are paid, the liens are paid in the order of their priority, the most senior first, until they are completely paid, then the next one in priority, until there is no money left. Any remaining liens will be removed from the property without compensation.

I am an attorney in Cleveland, Ohio. This is the law of the State of Ohio which is a common style of the law, so it is likely the law in your state. To be certain you should talk with an attorney licensed in your state. The specifics of your case or the law of your State may change the answer. Please consult your attorney for an accurate answer.