A foreclosure does affect one getting a loan. If a lien is filed against you it could pop up on a future purchase.
I suggest you contact a real estate attorney who is the best resource to read through your documents and give you the legal advice you need.
Some second loans end up being "unsecured credit." Most will accept some sort of payment & forgiveness plan (e.g. $50K they may settle for $30K promissory note paid over 5 years).
I am assuming that the property that you lost to foreclosure had no equity.
Once the property it is lost to foreclosure and there was not enough equity to cover any junior mortgages (liens) these liens become unsecured personal debt and the creditor have the right to pursue payment of unpaid debt.
In addition to Grace statement, the Mortgage Debt Relief Act of 2007 ( which is set o expire by the end of 2012) is for non-recourse loans (purchase money).
This Act mainly applies to the senior mortgage but it could also apply to any junior mortgages if they decide to cancel the debt by reporting it to the IRS as a loss. If this is the case they will send 1099-C.
Most homeowners believe that by letting the home go into foreclosure any debt will be automatically cancelled which in most cases is not.
There are some other cases where you can force cancellation of these debts but as anything it requires an examination of your personal situation as it changes in a case by case basis.
Many of these 2nds mortgages that have become unsecured debts are been sold to collection agencies and I've seen it where some of them are taking court actions while most are going under the radar as they are going dormitory for now but they could pursue once the economy and the housing market is out of the current mess.
If you buy another home and if your current unsecured debt (which appears to be the case) creditor brings you to court and a judgement is awarded to them, then they could put that judgement against your new home.
My suggestion would be to run your credit (as Andrea suggested) and see it that debt still active. If so then there are some other ways to deal with it.
I if you need assistant and better understanding you can follow any of my peers suggestions or contact a bankruptcy attorney and/or contact me for a more in-depth explanation and I can refer you to an attorney depending your personal situation.
Or you can go to the IRS website and read some more about the mortgage debt relief act of 2007 by going to this IRS link
Hope this helps and good luck.
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If you're referring to the Mortgage Forgiveness Debt Relief Act of 2007, this act was created to prevent homeowners who sold homes short or lost homes in foreclosure from being taxed on that portion of the forgiven loan amount. There was never any requirement that lenders who held security in a home "forgive" the homeowner for their debt once the home was sold or foreclosed.
In fact, as I understand it, when a home is foreclosed, the only lender who is unlikely to come after the buyer will be the senior lien holder or the first, but the second and third or any other lenders and debt holders (including homeowners association) still have the ability to collect the debt from the home buyer. Their junior liens, while not collectable against the senior lien holder (who gets the home) or the subsequent buyer of the property, are still often valid against the old home owner. So, again, as I understand this, unless the junior lien holders exonerate you--you're still on the hook for the money.
Since you are being contacted by the second lender, you'll need to contact the lender for to determine how to discharge the debt. If you would prefer and have the money, I would suggest contacting an attorney to discuss your options if you cannot pay off the second loan or any other subsequent debts.
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Or, if you want to buy another home, you could align yourself with a direct lender or mortgage broker who can look at your financials and credit history to determine your eligibility for another purchase. You could fill out a loan application and give them permission to run your credit report to see what is there.
I am curious about the title history of your foreclosed home. If it were bought back by the bank as an REO, I would be surprised they could transfer a clear title without the 2nd lender signing off. Especially if the home has since been resold as an REO on the open market and is now occupied by new owners. If the second lender can legally come after you for any unpaid debt would be written in the terms of your loan agreement. If you would like me to email you a complimentary title history report, please contact me through my Trulia profile and provide the address. Kind regards.
Teri Velios, as usual, has given you excellent advice.
This a legal question. as Teri Velios recommended, I recommend that you contact your Attorney for the answer to your question.
If you do not have an Attorney, than I recommend that you contact Ron Rossi. ron rossi is an excellent Real Estate Attorney.
The telephone number for Mr. Rossi is (408)261-4252.