Many Colorado homeowners have delinquent mortgages, and are having trouble making their mortgage payments. Either the first or the second lender can institute foreclosure proceedings if you default on your mortgage. However, a second lien holder would usually only foreclose if you have equity in your property. If you are upside down on your mortgage, they would not be able to collect any money. For instance, if you owe the first lender $150,000 and the second lender $50,000, but your home is only worth $100,000, the first lender would only get $100,000 if they foreclosed and sold your home at foreclosure sale. They would have to write off the $50,000 remaining balance. The second lender would have to write off the entire $50,000.
You can get rid of your second delinquent mortgage under the following circumstances:
- You could refinance and combine both loans into one new loan if you have enough equity.
- You could sell your home and pay off both mortgages if you had enough equity.
- If you are upside down on your mortgages and you cannot afford to make your mortgage payments, then you can sell your home with a short sale, if both lenders agree to work out some kind of arrangement between them to approve the sale or if the second decides to just walk away and write off the loss.
- File for Chapter 13 bankruptcy protection. If your home is appraised at less than what you owe on your first mortgage, the second mortgage debt would be classified as unsecured debt, which can be wiped out in bankruptcy.
Lenders Want to Help
Lenders do not like to foreclose. They would rather work out a payment plan for you. If you are in default on either your first or second mortgage or both, contact your lenders and see if they are willing to give you a loan modification, refinance or forbearance. A modification is when the lender agrees to modify your existing mortgage by lowering your interest rate and/or extending the term of your loan to give you a more affordable monthly loan payment so you can keep your property. When you refinance, you obtain a new loan at a lower interest rate for a fixed term which pays off your existing mortgage. Forbearance is a short term agreement to let you get caught up on your default. After you catch-up, you go back to paying your regular mortgage payment. You should also speak with a Colorado foreclosure defense attorney who can advise you on what to do if you are delinquent on your mortgage.
Government Help
Under the Home Affordable Modification Program, homeowners who are eligible can obtain a mortgage modification which also modifies the second mortgage, providing both lenders and the borrower agree to participate voluntarily in the program. There are also lender incentives to extinguish the second mortgage. You should ask your lender if they are participating in the program and if you are eligible.
Attorney Help
You should speak with a foreclosure defense attorney to help you avoid foreclosure as a result of delinquent mortgages. The attorney can explain all options that may be available for you to save your home from foreclosure. The attorney is skilled and experienced at negotiating with lenders.
