What happens to a second mortgage when a first mortgage is foreclosed on? 5 Answers as of February 02, 2012

What happens to a second mortgage when a first mortgage is foreclosed on?

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H. Scott Basham, Attorney at Law, P.C. | H. Scott Basham
Typically the second mortgage holder is simply out of luck. This is why second mortgages usually have higher interest rates.
Answer Applies to: Georgia
Replied: 2/2/2012
The Law Office of Darren Aronow, PC
The Law Office of Darren Aronow, PC | Darren Aronow
The 2nd mortgage will then file for a deficiency judgment against the homeowners, which you may want to file a bankruptcy to get rid of.
Answer Applies to: New York
Replied: 2/1/2012
Law Offices of Pamela L. Stewart | Pamela L. Stewart
The debtor is, more than likely, still liable for the debt owed on the second mortgage. If the second mortgage was a non-recourse loan, then the second lien holder cannot pursue the debtor to pay the balance owed on the second. Home equity loans in Texas are non-recourse. However, if the loan is a recourse loan, you would still be liable for the second lien. You need to determine how much the home sold for in the foreclosure sale to determine if there were any proceeds from the sale that went to the second lien holder.
Answer Applies to: Texas
Replied: 1/31/2012
Braunstein Law, PC
Braunstein Law, PC | Jacob Braunstein
Typically, when a home is foreclosed on, the owner of the first mortgage takes the property and the owner of the second mortgage is left with nothing. Then the owner of the second mortgage may go after the borrower for the deficiency - the amount left owing.
Answer Applies to: Oregon
Replied: 1/31/2012
The Law Offices of Mark Wm. Hofgard, Esq.
The Law Offices of Mark Wm. Hofgard, Esq. | Mark Hofgard
Unless the holder of the second mortgage pays the first, it becomes an unsecured debt after foreclosure. The second mortgage holder will then pursue other collection means (lawsuit). Frequently, second mortgage holders will negotiate terms of this debt by reducing the amount owed in exchange for a lump sum settlement. An attorney can help you negotiate these terms.
Answer Applies to: Colorado
Replied: 1/31/2012
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