Q&A: How will a foreclosure work with a second mortgage?

Question by Missi B: How will a foreclosure work with a second mortgage?
Mortgage company put us into foreclosure on the 1st because of being behind in the escrow but there is a second on the house, with the same company. How does that work?

Best answer:

Answer by Thomas M
Give the bank the key and RUN !!!!!!!

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4 Comments → “Q&A: How will a foreclosure work with a second mortgage?”


  1. J A

    Jun 28, 2013

    That’s rotten eggs … you’re saying you’re in foreclosure for not paying your escrow (taxes and insurance)?

    Have you talked to the company to find out if they are willing to restructure everything?


  2. v b

    Jun 28, 2013

    The first mortgage is probably non-recourse. The second is probably recourse.

    Recourse means they can sue you for the difference and even if they cancel the debt, it may be taxable income to you.

    See IRS pub 4681.


  3. chatsplas

    Jun 28, 2013

    Completed Foreclosure of First mortgage wipes out second and other junior liens. TALK to lender on First and try to cure your default. IT’s EXTREMELY rare for lender nowadays to put you in foreclosure for being behind on escrow. This is curable situation. It may be an opportunity to do a loan modification on first or second mortgage, changing to lower interest rate. This is most likely if you have some equity in home, have adequate income and good payment history.


  4. Allison W

    Jun 28, 2013

    Missi, the second mortgage will always get wiped out by the first mortgage. The process in foreclosures is whatever the sales price is all the proceeds are given to the first mortgage and then whatever left is given to the second. Here are a few examples that might help explain better.

    First mortgage 150,000 Second Mortgage 30,000 Foreclosure sells for 160,000. In this situation the first mortgage is paid off and 10,000 will go to the second.

    Another example is 150,000 Second Mortgage 30,000 Foreclosure sells for 90,000. First mortgage gets 90,000 second gets 0.

    Even though they are with the same company the second will get handled the same


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