Foreclosure in 60901>Question Details

Nikkiboo, Other/Just Looking in Illinois

what happens if you got a first and second mortgage and you foreclose on your first mortgage,what happens to?

Asked by Nikkiboo, Illinois Sun Jul 13, 2008

if I decided to foreclose on my first mortgage , what will happen to my second mortgage that I have through another bank.

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12
Nicole,

They are just saying that to scare you. However, in some areas this is possible, I would check with your state's attorney general's office and ask them that question. Failing that, I would seek the advice of a competent real estate attorney, most real estate agents aren't qualified to answer these questions for you since they deal with legal matters that we are not licensed to handle.

Cameron Piper
Web Reference: http://www.campiper.com
1 vote Thank Flag Link Sun Oct 5, 2008
I understood that if you had a short sale, and you had a 2nd mortgage that if the first got some of there money maybe not all and the 2nd got nothing that the 2nd mortgage can still go after you for that money and hold you responsbile for it even if you no longer have the property? This was told to me by my bank. Correct? They said they could sue for it and it would follow me in my life. I am unsure if they are just sayong that to scare me or if it is true. The first and the 2nd are actually with the same mortgage company. Any ideas?

Thanks!
1 vote Thank Flag Link Sun Oct 5, 2008
Hi Nikkiboo

If you foreclosed on your first mortgage, there may not be enough money from the foreclosure sale to pay the second mortgage holder. If there is equity remaining in your home after the foreclosure sale, the second mortgage holding company is entitled to the remaining balance.If you any more question please search

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0 votes Thank Flag Link Wed Oct 2, 2013
In approx 2003/2004 we refinance the home to a 5/1 arm in a vain attempt to lower our payments. Which by the way, the lender who performed the refinance for us was arrested for fraud. A year before the house market crashed we took a 2nd mortgage on residence to make repairs to home that was needed. After that our house appraised at approx 390k. And now it is worth less than 150k. During that time I had experienced a layoff and then eventually rehired to a much lower paying position. Also in 2009 my family had to file for Chapter 7 bankruptcy. We were eventually discharged of all debts. We kept the home and 2 cars. We owe a total of approx 375k in both the 1st and 2nd mortgages. Both mortgages are from different banks. We have performed loan modifications through both banks on each loan. We are drowning day by day and the 1st mortgage is due to mature to the original rate in October. We know we want to move away from residence. We are scared to though because what if the banks sue us for the deficiency? We are at a lost at what to do. Do we short sale or do we foreclose? What can be the financial ramifications against us? Can a lender come after us for the deficiency when my wife and I are over 50k in current medical bills for her health? When we walk or short sale our family will have nothing for the banks to come after. We are trying to start with a clean slate.
0 votes Thank Flag Link Thu Apr 8, 2010
your 2nd mortgage can decide to show up and the foreclosure sale and bid. If they think there is sufficient equity which will allw them to get some of their money back then they will need to outbid the first mortgage holder. If the second mortgage company WINS the bid tehn they own the property and they have to PAY off the 1st mortgage. If they do not feel that there is enough equity they they will simply NOT bid and lose their money. Hope this helps--- I supervised a large foreclosure dept. for about 4 years.

call me anytime
Tino Martinez
630-835-9044
0 votes Thank Flag Link Thu Jul 31, 2008
The second would get nothing. You may have to pay the IRS taxes on the amount lost on a short sale. Is this your primary residence or a second residence? Have you lived there more than 2 years? Good luck.
0 votes Thank Flag Link Tue Jul 29, 2008
Don't let it go to foreclosure. You would be better off doing a Short Sale. Your credit will take less of a beating. A short sale is when you sell your home for less than what you owe on it and your lenders agree to let you do this. How many payments are you behind?
0 votes Thank Flag Link Tue Jul 29, 2008
That would be for the seller. However, last year the government created The Mortgage Forgiveness Debt Relief Act of 2007. You can find information about that as well as possible tax consequences at the link below.

http://www.irs.gov/newsroom/article/0,,id=174034,00.html
0 votes Thank Flag Link Sun Jul 13, 2008
Scott,

When you say there may be tax consequences associated with a short sale, do you mean tax consequences for the seller or for the buyer?
0 votes Thank Flag Link Sun Jul 13, 2008
If the property is foreclosed on, then unless the 2nd lien holder (2nd mortgage) was to also purchase the 1st lien, the 2nd mortgage would be "cleared" and that lender would receive nothing.

I know this may be off the topic, but most people do not understand that there are also tax consequences associated with foreclosures and short sales. For this reason, you definitely want to consult both a real estate and tax attorney.

If you are the one being foreclosed and you would like to try and remain in your home, you might want to contact your lender and see if there is another solution. Most lenders will try and work with people that would like to remain in their homes.
0 votes Thank Flag Link Sun Jul 13, 2008
Nikkiboo,

They are in 2nd lein position, so that is something the banks are going to have to work out in the sale of your property. The first mortgage holder has the majority of ownership in the property the second one has a little. Most likely the second mortgage holder will lose more money in the sale of your home. But I am not for certain. Thats a very good questions and I would like to see more answers on this.

Brent Bester
Mortgage Professional
614-622-8916
0 votes Thank Flag Link Sun Jul 13, 2008
Are you the homeowner letting your home go to foreclosure? If so, then at foreclosure, the highest bidder will very likely be your bank for the first loan, and the second lien will be cleared. If I've misunderstood, and you own a mortgage or trust on a home where someone else is not paying, then the principal applies. However, if you are the noteholder, you hopefully have an attorney representing you through this process. Done wrong you could end up really in trouble. If you are the homeowner who owes the banks, you might want to consider a short sale. The blog post below pay help you.
0 votes Thank Flag Link Sun Jul 13, 2008
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