Do both lenders in an 80/20 mortgage have rights in a foreclosure in Illinois?

Under the mortgage foreclosure IL rules, generally both a first and second mortgage holder will have the right to foreclose on a home. This means that a lender who holds the second mortgage note on your home may sometimes force you into foreclosure even if you are current on the first mortgage. However, a lender may not want to do this.  If you have an 80/20 mortgage, it is important to understand how and why this rule is in place, and to understand why a lender who holds a second mortgage on your home may not wish to foreclose even though he could. 

An 80/20 mortgage means that when you bought your house, you did not have a 20 percent down payment to put down. This 20 percent down payment is usually required in order to protect the interests of lenders, since if property values fall, the homeowner has some equity/ownership interest and the house isn't going to end up being worth less than the mortgage on it. If a person doesn't have 20 percent to put down, he may take a first mortgage for 80 percent of the value of the house and a second mortgage for 20 percent of the value in order to avoid something called Private Mortgage Insurance.

Since the house is collateral for both mortgages, either mortgage holder generally has the right to foreclose. However, when the house is sold, the first mortgage holder will have first claim on any money made. This means the second mortgage holder may not get all his money back if the house sells for less than the total debt that the borrower owes. As such, a second mortgage lender may want to explore other options with a homeowner before foreclosing. 

To get help understanding what your options might be for dealing with foreclosure on your home, it is a good idea to consult with a lawyer for guidance and advice.