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Home sold due to foreclosure - Am I liable for second loan?

I had a [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] on a rental property that I lost to foreclosure. The company with the first mortgage sold the house to satisfy the first mortgage, and there was nothing left over. Am I still legally liable for the second mortgage?

Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome to MortgageFit Forums.

I must make it clear to you first that whether you take a first or a second mortgage on your home; you are responsible for the repayment of the loan.

The home is used as collateral against your loan. Unfortunately the home was sold and the amount of money could be utilized only to pay the first lender. So, you are still on the hook for the second mortgage loan.

The second lender didn't release you from the mortgage and you still carry the liability to pay it. He still holds the promissory note that you signed.

Based on the state that you belong to, the lender can file suit against you anywhere between four to fifteen years. The time normally starts from the date the loan would have come due.

You might get harassed by the collection agencies later on or may face problems when you apply for another mortgage later.

But as you know everything passes away with time. So, your case too will improve either by your repayments or with time.

God bless you.

For MortgageFit,
Samanthartgage

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Often in these cases the lender is found to charge off the loan as he thinks that the debt can't be collected.

But you are not freed from the debt with a charge off. In a charge off the lender passes the debt to a collection agency to recover the debt.

This may have serious impact on your credit report and will stay on your report for seven years. So it is better if you take some time to work out a plan and try to pay off the money.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi all,

I am new to mortgage industry and would like to know which is the best site to learn about mortgage and also if someone can help me to review the mortgage docs!!!!

Thanks

appreciate your time and help..:)

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Sid,

Welcome to MortgageFit Forums.

Well I guess everyone would like to help you in this matter. As a beginner you must go through the basics of the mortgage industry first and then move into the detail.

Gradually you will acquire more and more knowledge through learning and experience.

As a member of MortgageFit, I shall definitely suggest you to go through this site for knowledge. :) This site has indeed got a vast collection of different articles and stories covered on mortgage.

There are a lot of other good sites also and you will find them on the internet. So, depending upon your requirement you can go through different sites. There is no harm in learning for different references.

You can take advantage of the forums of this site also. Try to participate in our forums and go through the visitor's queries and answers given by the members and other guests. You can gain a fair idea from there. You can also give your views to different queries.

Also if you want you can get your doubts cleared by posting your queries in the forums.

If you have a wish to learn then you will get plenty of help not only from here but from other good sites also.

God bless you.

For MortgageFit,
Samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am going to buy a home which is at foreclosure and would be attending an auction. The house has a 1st mortgage of $290K and a second mortgage of $80K. My question is if I buy the house will I need to pay the second loan or will it be enough to pay down the first and the back taxes.

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Laurence,

As far as I understand, you need not pay for the second loan. Generally, when a first mortgage forecloses, the second loan or the junior lien gets wiped out.

What actually happens is that, when a senior lien forecloses, the junior lien holder or the second lender sends a representative to attend the auction. This is to make sure that the property is sold at a price such that the second lien is also paid off. The second lien holder may also buy the property in order to resell it. No doubt, they lose their money but then they can later on sell the property and get back the money along with the gains.

Hope this helps..

God bless you.

Samantha

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:b455fd4f0c]
I am going to buy a home which is at foreclosure and would be attending an auction. The house has a 1st mortgage of $290K and a second mortgage of $80K. My question is if I buy the house will I need to pay the second loan or will it be enough to pay down the first and the back taxes.
[/quote:b455fd4f0c]
you will have to make an offer on this foreclosed property by bidding at the auction. you need to contact the foreclosure sale trustee to know about the minimum bid that can be made. if you bid is accepted then from that amount the first mortgage will be made and anything remaining will go towards repayment of the second.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i have a first & second mortgage .if i pay my first mortgage every month an not my second mortgage at all . can my second mortage take my home.

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miller_st's picture
miller_st | Joined: January 17, 2007 04:47 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

To take your home through foreclosure the second mortgage holder will have to purchase the first mortgage and then foreclose.

As his mortgage is subordinate to the first mortgage, if the house gets sold, first mortgage dues will have to repaid then other subordinate liens will be repaid.

If there is enough equity in the house then second mortgage holder might purchase the first mortgage and then foreclose. As he will know that even after paying off the first mortgage he will have the money to recover his balance.

Miller

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am selling a B&B and the buyers can only get financing for $700K of the $1,200K purchase price. They can only put $250K down and want me to take a $250K 2nd mortgage (Purchase Price Mortgage) for the other $250K. They agree to pay off the loan in full in 3 years, and to pay 5% annual simple interest. Interest not paid until the end of the 3 years.

What are my risks in accepting this offer?

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cliff3's picture
cliff3 | Joined: May 5, 2008 02:15 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi aleaf,

Actually secon lien holders do foreclose all the time but, as miller said they are required to first satify the first lien holder before they receive any proceeds from foreclosure sale.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hey!

Thanks for sharing all this information!

--------------------------
rescue-me-now.com

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Ishaan.

Welcome to the forum.

I agree with Cliff here that the second mortgage lender can also foreclose but after foreclosure the first mortgage lender have to be paid first because the first mortgage lender has the first priority. In such cases the first mortgage lender buys out the second mortgage lender if you are current and have the potential to pay him off.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What happends to a first mortage when a home is foreclosed for the 2nd loan. Does the person who buys the property at auction become responsible for the first loan?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Carol.

The second mortgage lender can foreclose but after the sell the first mortgage company should be paid first and then the second mortgage lender will get his money. By the way, the person who buys the property in the auction will not be responsible to pay your unpaid debt. It is your debt and you are responsible to pay it off.

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi carol,

welcome to our forums.

The person buying the property at the foreclosure auction does not become responsible for the first loan. Since the second lender wants to foreclose, either he or the borrower has to pay off the first loan. The second loan is subordinate to that of the first. So, the second lender and the borrower needs to talk to the first lender and inform them about the foreclosure. In most cases, the second lender has to satisfy the first and then recover his money from whatever is left behind.

Good luck

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am finding it difficult to make my mortgage payments and would like to know what are the financial and legal implications of a foreclosure

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi journvic,

Foreclosure isn't the way out when you can't pay for the mortgage. I mean there are various other ways to choose from if you can't repay. You can opt for an alternative repayment plan or a loan modification. Or you may even [url=http://www.mortgagefit.com/refinance.html]refinance[/url] to a lower rate so that you'll save in interest. Just check out the 17 ways to avoid foreclosure .

Take care

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What is the liability to the borrower if they foreclose on their home. First time buyer, unable to meet mortgage payments and unable to get a fair price when selling. Can the lender attach paychecks and bank accounts?

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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Well, the lender can attach paychecks and bank accounts if you fail to pay off the deficiency payment, if any. However, if the lender hasn't declared foreclosure, I would suggest that you talk to him regarding any alternative options with which you can pay off the mortgage. You will find some of the alternative options at http://www.mortgagefit.com/foreclosure/17ways-avoid.html .

Good luck

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

MY PROPERTYS VALUE IS $650000.00 IN THIS MARKET. i OWE $725,000.00 ON THE 1ST AND $140000,00 ON THE 2ND. I am in modification on the 1st and 4 months behind on the payment. My 2nd is 2 months behind and the 2nd lien holder is going to foreclose on the property by the end of the month if i dont pay the past due amount. Can the 2nd foreclose? with the property being upside down and if the 2nd forecolses and can not sell the propoerty to satify the first what happens next? once the sale goes through and there is not an offer to satisfy the loans what is the position of the 2nd ? and what is the next step for them?
last question, where does this put me whan all this takes place? :? :?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi JOHN

Did you speak to your second lender about a loan modification or forbearance? I think you should first try to negotiate with the 2nd lender and see if he agrees to any of the options.

The 2nd lender can foreclose the property. But as far as I know, if they foreclose, they will have to pay off the dues of the 1st lender as well. If the lender forecloses the property your credit will be badly hurt. It will be lowered by 250 points.

Thanks.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

don't pay for the 2nd loan is the ans.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

we wouldn't do that. we just want out from under such a silly, very abusive loan. we're not trying to evade paying bills.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

In my opinion, you should speak to your lender if you are not able to pay the mortgage dues. Once you inform the lenders, he may give you the option of loan modification. If you want to sell off the property, you can even apply for a short sale or a deed in lieu. You may even check given link to know more about ways to avoid foreclosure:
http://www.mortgagefit.com/foreclosure/17ways-avoid.html

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

if i renegotiate my 1st mortgage loan and my 2nd mortgage loan is charged off, and I do a Bankruptcy and Keep the home, what happens to the Charged off 2nd mortgage, does it stay attached to the home?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Sher,

It will depend upon the type of bankruptcy you file. You can request your second lender to withdraw the account from collections and include it in bankruptcy and try to get it discharged. If the second loan is not discharged, you can then negotiate with your lender and get a payment plan to pay off the mortgage.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I would feel bad from them if they lost their jobs or really cannot afford it. But I was told that it is being a trend and being recommended in the Indian community in SF Bay Area to take advantage of the goverment assisted program. It is sad that these people are selfish and irresponsible. My next door Indian neighbor was able to get the 2nd loan (equity line) for $350K soon after they purchased the house. She is a mortgage broker. They put down 15% on the $1.5M home in early 2006. Now they are on the second notice of forclosure and already cash out the $350K to buy new BMW SUV, Mercedes, and family vacations. Per my research, they have not been paying the property tax and stop making the mortgage for almost a year now. My question is this can the lender (2nd mortgage) still can go after them? I know the prim. lender will let them go for free since the Obama signed the new law for the foreclosure. Several other Indians neighbors are talking to me and that they are planning to do the same. They told me I should do it too since my house is also $200K under water. I cannot see myself doing it. I am obligate to my responsibility that I have commited. But it would really help to get to loan modification for the 30 fix term. But I cannot since my home is under water and both me and my wife still have job. However, I felt that goverment is not helping out good person like me, but only the bad one. :-(

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi ikey,

Though your home is underwater and both of you have your jobs, you can still apply for a loan modification. You will have to contact your lender and inform them about your hardship in paying off the loan. If the lender is convinced, he would accept your request. Thus, the lender would reduce your interest rate and increase the term of the loan.

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I guess that also depends on the company. Our company told us they would work with us, told us an amount to put aside, then would not take our calls as the sales date neared. I had to call them crying and begging someone to talk to me before they told me they'd decided not to do the modification because my husband's w.c. was not guaranteed income. They would not even take my attorney's calls. They pulled the rug from under us and left my family almost homeless. :(

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Felicia,

Though the first lender has foreclosed your property, you would still be liable for the [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url]. You will have to pay off the second mortgage dues. You can contact your second mortgage lender and negotiate for a payment plan so that it becomes affordable for you to pay off the loan.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi, I have recentlly went through a divorce and my ex-spouse is not willing to work whit me in any way. I hae a house loan of 250k and I could'nt continue to make the payments, they won't agree to a short sell or anything to help get the house sold. I have'nt made a payment in 4months,and my loan was sold,but I have'nt heard from new lender,what are my options?? Loan was sold to Freedie Mac?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Your query has been answered in the given page:
http://www.mortgagefit.com/inprocess/about32996.html#143560

Have a look at it. I hope it'll help you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

The seller accepted our offer, but put a condition of settling a 2nd T.D. (assume that means Trust Deed) of $30k. Is that normal? What should I be concerned about or ask about? I'm inclined to just counter the counter with a NO on that condition. What do you think?

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Helen,

If the seller had a second loan, then it is the seller's responsibility to pay off the second loan. You are not liable to pay that money to the seller. I would suggest you to check out other short sale properties in the same locality and try to buy one of them.

Take care.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I bought a shriff sale auction house due to the judgement of 1st mortgage in Jul 2008, I sent email requested country treasurer, please let me know if there is any lien which I'm responsible for against this property as a new owner. Country treasurer responded back stating 2 utility unpaid liens...I paid them off. Now I see there is a Tax sale liens against the property before I bought it. I stop by treasurer office..they are saying, in county property tax bill, there is tax-sale certificate number mentioned always. You r responsible for this or Tax-sale certificate buyer will request for a deed. Can I sue county for misleading or not giving nough info?
2nd there is 2nd mortgage against this property by last ownder...am I responsible for that mortgage pay off at all? Thanks for help!

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Kumar,

You can consult an attorney and he would give you the right opinion whether or not you would be able to sue the county for misleading you. The [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] holder still has a lien on the property. You can contact the previous owner and ask him to clear off the dues. Rather, it would have been better if you would have asked the owner to pay off the dues before purchasing the property. If the previous owner does not clear the dues, then you could be held responsible for it.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Last owner of my property scammed many people and got into prison by federal govt. It seems either he played save game using good friend and took loan(home equity) from bank and then record his first loan from friend in the country. So I see, Recorder office recording of big loan and first loan has later date and Bank loan is first. As he was going to loose his whole property and all because of scamming many people. So his friend might had helped putting a show-up mortgage loan($86,500 with 10% interest) and got judgement against that mortgage so country auction it out for $102,000 and 2nd mortgage lender(bank) were not involved and never came to bid even. Now I own this place and trying to understand and get a clean title and found...Bank loan has grown to double and they are on the way to foreclose the house. I've never been contacted by Bank so far. Please advise me safe and better way to proceed in this.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If my house goes to auction due to foreclosure and the sale is for less than the amount owed on my home, am I liable for the outstanding amount?

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sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Kumar,

If there is a lien on the property and if that is not fulfilled, then the creditors have the rights to foreclose the property. I would suggest you to speak to an attorney and discuss your case in details. He will be the best person to guide you in this regard.

Take care

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I know I am probably going to have to talk to a RE attorney, but am trying to avoid that cost if possible. I live in AZ where they can not go after you for the foreclosure or for the difference in covering a short sale vs. what you owe.

I owe about 96k on my first, and 6K on my second. If I default on my first, but continue to remain current on my second **and** plan on remaining current on my 2nd, even after foreclosure - what happens? Will my 2nd lender continue to work with me accepting my payments on the loan without taking legal action? Or would I be liable to have to pay it all back immediately?

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Rachelle!

Welcome to forums!

The second lender will always want you to clear off the dues that you own on your second mortgage. If you keep on making the payments on time, then the lender won't take any legal actions against you.

Feel free to ask if you've further queries.

Sussane

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JESSIJAMES's picture
JESSIJAMES | Joined: August 7, 2010 12:05 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

My mother is trying to get a loan modification. My name is on the deed, but not the mortgage. If the company forecloses on the property, how will this affect me? Will I be able to buy a home?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Your query has been replied to in the given page:
http://www.mortgagefit.com/inprocess/about41995.html#176073

Take a look at it. Hope it helps you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

No. Responsibility for the loan deficiency will remain with the original debtor .

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Samantha, what happens if the first and second mortgages are owned by the same lender. Am i still liable for the second mortgage?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome dago,

Though the first and the second mortgage is held by the same lender, you'll be liable for paying the second loan after the property is sold off at an auction.

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