2nd Mortgages and Foreclosures

Many homeowners have a second lien mortgage secured by their property to access the equity in their homes. The funds are typically used for:

• Home improvements
• Vacations
• Retirement
• College tuition
• Bill consolidation
• Medical bills
• Other family expenses

A home equity line of credit or a construction loan for home improvement are examples of a second lien mortgage.

2nd Mortgage Foreclosure Defiency, Judgments, and Laws

Forclosure proceedings are conducted by judicial or non-judicial proceedings depending what state the property is located in. Bankruptcy court has jurisdiction over discharging bankruptcy proceedings and any payment of bankruptcy 2nd mortgages.

Foreclosure affects both the first and second mortgage if you default on your mortgage payments. The first lien foreclosure holder has a priority in the right to receive payment from the foreclosure sale proceeds and generally institutes the foreclosure action. The second lien foreclosure holder is made a part of the foreclosure proceeding, but is considered junior in priority. The same is true in bankruptcy proceedingsinvolving bankruptcy 2nd mortgages.

Typically, the second lien foreclosure holder is distinguished in the foreclosure proceedings because there is not enough money to pay them. However, sometimes they receive a very small portion. 

Junior Lender Remedies

The junior lender has the following remedies:

• Redeem the property by paying the borrower’s deficiency to the first lender
• Seek a deficiency judgment against the borrower after the foreclosure auction sale
• Purchase the property at the foreclosure auction sale.

Help from a Foreclosure Attorney

First and second mortgages foreclosure and bankruptcy second mortgages are complicated legal matters. It is recommended that you seek the advice of a foreclosure defense attorney and/or bankruptcy attorney to defend your interests in these matters and to advise you of your legal rights and options.