Posted on: 17th Sep, 2008 12:30am
If you're in financial hardship and you're not paying second mortgage for 150-180 days from the due date, the lender may foreclose your property or file a lawsuit and seize your personal assets. Read through the section below and find out what happens if you stop paying second mortgage.
What happens if I stop paying second mortgage?
If you're not paying your second mortgage, and your home is upside down (combined balance on 1st and 2nd loan exceeds the home value), the lender may not file a foreclosure. That's because he'll have to pay off the first loan before he intends to retrieve the money he has invested on the 2nd loan.
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
- Judgment/garnishment: The lender may file a lawsuit in the local court and get a judgment order to collect the unpaid balance. He can come after your assets such as bank account funds. The lender may have your wages garnished. Wage garnishment is a legal process in which an individual's earnings are partly or wholly withheld by the employer (as per court order) for repayment of debt.
- Charge-off: The lender may issue a second mortgage charge off and assign or sell off your debt to a collection agency (CA). The agency will then try to collect the loan payments by all means. If you don't make any payment, here's what the CA can do:
- Harassing calls/letters: The collection agency is likely to harass you with repeated phone calls or payment notices/letters. They may even call you at odd hours and disturb you at your workplace, though such practices are against the Fair Debt Collection Practices Act (law which governs the practices of CAs).
- CA may file lawsuit: The CA may even sue you thereby leading you to legal hassles. They may even get a judgment order from the court and go for wage garnishment or seize your bank accounts.
However, if your second mortgage debt is well past the Statute of Limitation (SOL), the collection agency cannot file a lawsuit. Even if they threaten to sue you after the SOL is over, send a cease and desist letter stating that your debt has crossed the SOL, so they shouldn't contact you any more. Still if they harass you for payments, file a complaint with the FTC or State Attorney General.
What to do if I can't pay second loan
Once your home is sold off at a foreclosure auction, the second mortgage debt or the deficiency balance on it will be considered as an unsecured loan which you can pay off in monthly installments. In case you can't afford to pay the deficiency balance in full, you may negotiate a settlement with the lender or the collection agency to whom the lender may have assigned/sold off your debt.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
i have a 1st & 2nd mtg and i have requested a short sale. i am able to make my 1st mtg payment but i do not have the funds to make my 2nd mtg pymt. if i stop paying second mortgage what happens? can the 2nd lender foreclose on my house? and if not, what happens to the 2nd loan? if they charge off & put a lien on my house, then i will never be able to sale it because i owe more than the house it worth? any advice? also, if they charge off & put a lien on my house, can i then bk it?
Hi Sophia!
Welcome to forums!
If the loan has been discharged in your bankruptcy filing, then you won't be liable for paying that debt and the lender won't be able to come after you.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If the loan has been discharged in your bankruptcy filing, then you won't be liable for paying that debt and the lender won't be able to come after you.
Feel free to ask if you've further queries.
Sussane
I have a 1st and equity loan on my house and have recently filed BK7 and did not reaffirm my loans but have been making the payments even though they dont show up on my credit report anymore. My home is 100k underwater and know that I can walk away and have no repecutions now, but want to stay in the home. What happens if I stop paying my equity loan? WF is my lender for both loans.
Hi Eric B.!
Welcome to forums!
If you stop paying the equity loan, the lender may take steps to foreclose the property. As you haven't reaffirmed the loan, the lender may not come after you in order to recover the deficient balance.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you stop paying the equity loan, the lender may take steps to foreclose the property. As you haven't reaffirmed the loan, the lender may not come after you in order to recover the deficient balance.
Feel free to ask if you've further queries.
Sussane
It was me above... just got logged out!!
i have not make payments on my second mortgage sence sep 2011 .i was under imprission the bank is going to modfy it just llike they did the first they gave it to collection agency and now they are harasing what should i do[/b][/list]
Hi suma!
Welcome to forums!
You will have to deal with the collection agency and set up a payment plan. You will have to pay off the dues as per the payment plan and try to get rid of your debts.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You will have to deal with the collection agency and set up a payment plan. You will have to pay off the dues as per the payment plan and try to get rid of your debts.
Feel free to ask if you've further queries.
Sussane
my second is charged off. I have not made a full payment in over 3 years. What do I do? I've been getting letters saying they are going to take legal actions ? Our house is underwater about 150,000. We are current with our first.
Hi sandycane!
Welcome to forums!
You can pay off the charged off loan by setting up a payment plan with the concerned CA. This will help you in sorting the matter. You can even negotiate for lower payments.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You can pay off the charged off loan by setting up a payment plan with the concerned CA. This will help you in sorting the matter. You can even negotiate for lower payments.
Feel free to ask if you've further queries.
Sussane
We signed and did a deed in lieu with a prominent bank they owned our 1st and second loan. They had two different institutions handle the deed in lieu. We had our move out date and everything was suppose to be settled. we found out the one handling the deed in lieu never sent the pay off to the second mortgage. they said we abandoned the house but we kept calling them and they kept passing us along. My husband filed bankruptcy, I did not. i lost my job after 12 years now i have health issues and don't know if i will ever go back to work. they keep calling , I can handle that. But can they collect anything when I have no income. We lost the house because we are both diabetics and lost our medical insurance. We were never late before this did everything they asked they never followed though on anything we were told. Now the collection company keeps threatening they will come after me forever. I was told in a letter that we would get 2500.00 for moving expenses, and they sat on the paper work and in went in foreclosure. We never received anything.
Hi kittiekat,
If you don't pay off the debt, then they may place liens on your other property in order to recover the debts. You and your husband will be liable for paying off the second mortgage even after foreclosure if the sale has not led to the paying off the second mortgage dues.
Thanks
If you don't pay off the debt, then they may place liens on your other property in order to recover the debts. You and your husband will be liable for paying off the second mortgage even after foreclosure if the sale has not led to the paying off the second mortgage dues.
Thanks
Chase holds both my 1st ($140K+/-), and the $85k adjustable second, that I have been paying interest only on for about 8 years or so. I am maybe 75k underwater...current on payments, w good credit score but no income to show.
I have heard that banks will sometimes settle on a lump sum (10%?) on a 2nd payoff.
Do you feel there is ANY chance at all if I pursued this since Chase own both notes? How to begin the 'process'?
Thank you much!!
I have heard that banks will sometimes settle on a lump sum (10%?) on a 2nd payoff.
Do you feel there is ANY chance at all if I pursued this since Chase own both notes? How to begin the 'process'?
Thank you much!!
welcome alpha,
it will be completely the lender's discretion as to whether or not he will consider your offer. but there is no harm in asking. you should contact chase and request them to settle the second mortgage.
it will be completely the lender's discretion as to whether or not he will consider your offer. but there is no harm in asking. you should contact chase and request them to settle the second mortgage.
foremost servicing company purchased or assumed a second mortgage my late wife and i took out in 1990 for thermal windows. according to their records when they popped up during a title search, they have not communicated with me since june, 1997 when i told whoever called that i had paid it in full in late 1996. due to the time, i cannot at this time find the cancelled cashier's check through my credit union. aren't they a little past the virginia sol?
Hi Bill,
Since it is such an old debt, I think it is passed SOL and they cake any legal actions against you if you dopay off the loan.
Thanks
Since it is such an old debt, I think it is passed SOL and they cake any legal actions against you if you dopay off the loan.
Thanks
I have a home in California. I almost lost my home four years ago. My first mortgage modified the loan and the second refused to work with us and charged it off over 31/2 years ago. I have not made a payment on the second for 4 years. How does it work with the 2nd lien on my home. If the debt is no longer collectible does the second lien come off? Is the lien there forever and if I die or sell will I owe 2nd mortgage amount plus all back interest? Or can I get lien removed.