What if second mortgage lender does not foreclosure?

Guest 0.10 Dollars($)

i am at a loss pls help. my second mortgage is in default, it's an investment property. I had a talk with someone in the loss mitigation dept and what I owe is $120K on first mortg. And 50K on the second. I will perhaps only be able to get $70K at the auction, so the second is going to lose all it's money considering my situation. I did ask the second company as to if they would foreclose but for that they will have to buy out first (that's what they said but I ain't sure on this). They didn't tell me what can happen if they don't foreclose? I cannot afford to pay the entire balance from my money itself?

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi,

If your property is foreclosed, the first mortgage lender will get his amount first, and then the second mortgage lender will get his share. In your case, it is most probably that you can only pay the first mortgage lender. You can pay the second mortgage lender in monthly installments or he may attach a lien to your other properties if you have any.

Thanks,
Larry

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.77 Dollars($)

Hello Arthur,

Are you making regular payments towards your first mortgage?

It is true that if the second lender forecloses they will have to buy out the first. The first mortgage has to be paid off first with the proceeds since they have the primary lien.

Why do you think that you will get as low as $70k in the auction? Is it because of the market or is it due to the condition of your property?

In that case, the entire amount will go to pay out the first lender. And both of them may seek a deficiency judgement for the unpaid debt where you shall still be liable to pay it.

You should talk to your second lender immediately and see if he is willing to work out any alternative payment options.

If you have retirement account, you may also think of taking a loan from that to pay off this mortgage.

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