Question:

What happens with foreclosure on a second mortgage?

Answer:

Foreclosure on a second mortgage may take different paths if the lender that holds the second mortgage is different from the lender holding the first mortgage. In any case a second lien on the house comes subordinate to the first. In some states and particular cases, if the foreclosure proceedings do not cover both the first and the second mortgage, once the first mortgage is paid, you may owe nothing to the second lien lender. However, this will seldom be the case.

If the first mortgage lender decides to foreclose, they will care to get what is owed to them and since a foreclosure costs money to the lender, there may be little left for any remaining liens on the property. Thus, if the second mortgage lender does not receive anything, they may still come after you and you may prefer to file for bankruptcy to clear debts off records and start anew.

Also, if you are keeping current on the first mortgage only, the second mortgage lender has all the right to initiate foreclosure on their own.

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