In the situation of foreclosure on the first mortgage, many things can happen:
1) After foreclosure on the first mortgage, the second mortgage lender can file a civil judgment against you in the court. He can also garnish your income.
2) After the first mortgage lender gets their money through foreclosure, if anything remains, that will go to the second mortgage lender. But he can seek a deficiency judgment for the remaining amount of the loan.
3) If the second mortgage lender wants to recover his interest in the property, he can bid for the property at the time of foreclosure sale.
4) Even after the sale is over, if the second mortgage lender pays off the required amount of money to the first mortgage lender at the period of redemption, then the former can get back the property.
Also note that if the 2nd decides to take the loss you will incur it as income and get a 1099 next year.
You should sell. If you owe more than the house is worth try to get the 2nd to accept a lowered pay off. No use really negotiating with the 1st but a lot of times the 2nd will take pennies on the dollar rather than get nothing. But again you may incur the difference as income and be taxed on it. _________________ Eric Matthews
It is always worthy to come up with the required amount owed and repay it to the lender. This will help you to avoid the sale of your house. But, for the amount to be paid, you must make sure that you have the necessary fund.
Be very careful however if you consider a foreclosure bailout company. As a lot of times they will scam a person just to try and make a quick buck off your misfortune. If they can't then they are out nothing and you still lose your home. _________________ Eric Matthews
Posted: Fri Sep 21, 2007 1:54 am Post subject: RE: what to do if one has to foreclose with 80/20 loans
Hi Rich,
Welcome to our forums.
It is true that one cannot go through foreclosure on both loans simultaneously. Now, if the first loan is in foreclosure, then the second lender will not be paid through the sale until and unless the first lender gets back his part of the loan balance. The remaining sale proceeds should go to the second lender.
Now, if the sale proceeds aren't enough, then the second lender will either demand the money and the borrower has to pay him. Or else, he can seek a judgment also to recover the unpaid part.
Alternatively the second lender can also do a charge-off on the loan implying that he forgives the debt and will not collect payments any more. But tell me more about your situation. Then I'll be able to give you a better suggestion.
I have an 80/20 I can dump my home for enough to cover the first mortgage but I will be about 60,000 short on a 100,000 second with the bank. What can I do?
Talk to your second mortgage lender and see if they agree on an alternative repayment plan where you can make payments lower than what you're managing now on a monthly basis. _________________ Procrastination is the enemy of your financial sucess
mgibbs
