Hi Jeffrey,

Great question.

In this case, the mortgage lender holds a senior lien to the HOA, meaning their lien survives the HOA foreclosure and remains attached to the property. If it’s not satisfied, the lender still has the right to foreclose against the new owner.

Only junior lienholders and the former owner can fight over the auction surplus (in this case, the $70,000). If the mortgage lender were to claim from that surplus, they’d be implicitly acknowledging themselves as a junior lienholder, which they’re not. Doing so would extinguish their senior lien rights. So, it's highly unlikely the mortgage company will go after the surplus.

Before taking action, your first step should be to determine the market value of the property to assess how much equity exists. If the property has decent equity, the bank will likely not give up its position or reduce the payoff, 1-they have the legal right to recover the full balance by enforcing their lien.

That said, you could try contacting the mortgage lender and identify yourself as the new owner who’s willing to pay the loan or negotiate. However, in my experience, 99% of the time they won’t cooperate, either because:

1-They don’t understand the post-HOA foreclosure scenario, or

2-Due to confidentiality policies, they refuse to disclose payoff info to a third party.

Even if you get through, remember: you’re not the original borrower, so they’ll likely require a full underwriting process, assessing your credit, the property, and your qualifications, before they even consider a transfer or loan workout. That’s why, in many cases, it’s more efficient to negotiate a lump-sum payoff or settlement instead.

Just keep this in mind when negotiating:

The more equity they believe they have in their collateral, the less flexible they’ll be.
The less equity, the more willing they may be to settle.

Hope this helps you move forward more confidently.