Is it possible to foreclose on a second lien mortgage and who gets paid first?


Yes, it is possible that the second lender initiates foreclosure. The second lien holder has the right to foreclose if the second mortgage is in arrears. However, even foreclosing on the second lien mortgage, the first lender gets paid first, and the remaining money will go towards the subordinate liens.

For example, if a house is foreclosed with the second lien holder, and the property is sold at $200,000 when the first mortgage has a balance of $150,000 and the second mortgage comes to $100,000, the first lien has to be paid off. The second lien mortgage holder will get only $50,000 and may choose to file deficiency judgment against the owner of the property.

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