Second mortgage and foreclosure (loan, real estate, credit, fees)

[canyonhiker]

I'm wondering what happens in the following scenario - there are 2 mortgages on a property and the property is foreclosed. The primary mortgage is paid off in the sale but there were no funds remaining to pay off the second mortgage. Can the lender pursue from the borrower the balance of the second mortgage?
Thanks for any information or links that may help.

[renriq02]

yes and no.
it's called a deficiency judgement.
some states DO NOT ALLOW IT...you will need to check with your state.

Originally Posted by canyonhiker

I'm wondering what happens in the following scenario - there are 2 mortgages on a property and the property is foreclosed. The primary mortgage is paid off in the sale but there were no funds remaining to pay off the second mortgage. Can the lender pursue from the borrower the balance of the second mortgage?
Thanks for any information or links that may help.

[momix5]

How can you get a clear title if the second mortgage exists?

[renriq02]

you payoff the 2nd mortgage.....and when the house forecloses generally the lien follows you not the property.

Originally Posted by momix5

How can you get a clear title if the second mortgage exists?

[momix5]

I am confused will the bank let you do that? If you owe say 260,000 on your house and say 40,000 on the second mortage, but you can only get 280,000 for your house, You can satisfy the first mortgage but not the second correct? There would be a 20,000 deficit.

[renriq02]

yes...and either you pay it at closing or you will have a deficiency judgement....depends on the state.

Originally Posted by momix5

I am confused will the bank let you do that? If you owe say 260,000 on your house and say 40,000 on the second mortage, but you can only get 280,000 for your house, You can satisfy the first mortgage but not the second correct? There would be a 20,000 deficit.

[DoreenCampbell]

Or you negotiate a Short-Sale with the bank. Needs help from attorney or other Skilled in that negotiation, not just anyone.
Show them what the ouse is Worth Today, not what you were hoodwinked into paying. Then show the buyer willing to Pay that amount, and regardless that it's less than total of (many homes have piggyback mortgages) Both mtgs they will Usually agree, if the evidence is Solid.

Here's why: Holding costs, legal fees, Time is Money. Why pay More to get it when they can sell iti off books sooner & you take a Smaller credit hit due to short-sale than you'd take a whallop for foreclosure. This is growing to be a bigger trend now, as more banks realize they are screwed anyway. First they got the borrower, now the situation/market gets them. I'm not judging....
Doreen Campbell - one of few remaining Ethical AND experienced Florida Appraisers

[TWINZLUV]

If you are paying your first mortgage and dont pay your second mortgage can your second foreclose on you? or can they charge it off and come after you legal and financially in the state of CA?

[windtimber]

Come on people. Here's the OP's question:

[T]here are 2 mortgages on a property and the property is foreclosed. The primary mortgage is paid off in the sale but there were no funds remaining to pay off the second mortgage. Can the lender pursue from the borrower the balance of the second mortgage?

A "foreclosure" is legal remedy that provides all junior lienholders with the right to either buy in at the sheriff's sale or redeem the property from the sale. If the junior lienholders do neither, then their rights in the property are "foreclosed." After the redemption period all liens other than real estate taxes are gone.

The 2nd mortgagee no longer has any security. It can proceed under the mortgagor's promissory note and reduce the balance due under that note to judgment. It's not barred by any deficiency judgment statutes because it's not foreclosed its mortgage. Its merely suing on the note.

[Pastor Tax Girl]

Here is a scenario, please respond.
The foreclosure auction is complete, the first mortgagee asserts no further claim.
The second mortgage holder is trying to pursue their interest by sending the loan to collections.

What is the borrower obligated to pay at this point? Should they pay the amount the collections firm is requesting? Should the borrower wait for a legal judgment, such as a deficiency judgment? The property in question is in IL, if that helps.

thanks