Can they force a foreclosure if you are currently holding second mortgage?

Suppose you have a second mortgage on your home and the combined mortgage is more than your house’s value. Now due some unexpected financial problems, you stop making payments on the second mortgage. So what’s next?

The answer is Yes. First of all, you need to talk to the second mortgage lender and come to an understanding about making payments.

Since foreclosures are up and house values are down, the mortgage holder does not really wish to foreclose.

So it is very likely that you can be foreclosed on. However, banks and other lenders have become a little more leniant these days because of all the “creative” financing for mortgages lately. You should be able to refi and buy yourself some time.

During the foreclosure, the first mortgage holder will get paid first out of the foreclosure sale, but the second mortgage holder can initiate the foreclosure. If the house is worth more than you owe, you are better off to sell it, even if you have to give up some of your equity. Foreclosure is a nightmare.

Some of your second mortgages may have a clause that increases the cost to the borrower by 200% to 300% times the rate of the original mortgage. It may read like, “The failure to pay the montly payment shall carry that payment forward at the rate of (some) percentage,until paid.”

You have to be very careful while accepting such terms as the second mortgage holder may make you still pay off the second mortgage.

 


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