What happens to second mortgage after foreclosure on the first

what happens to second mortgage after foreclosure on the first

What Is a Charge Off of a Second Mortgage After Foreclosure?

After the first-mortgage lender forecloses, any surplus funds from the foreclosure sale after the foreclosing lenders debt has been paid off will be distributed to creditors holding junior liens, like a second-mortgage lender or judgment creditor (the person who sued you and won the judgment). When the first-mortgage lender foreclosed on your home, the second mortgage was also foreclosed and that lender lost its security interest in the real estate. (Learn more in What Happens to Liens and Second Mortgages in Foreclosure?) While the second-mortgage lien was eliminated, the debt associated with the second mortgage was not.

By Amy LoftsgordonAttorney. I lost my home to foreclosure about a year ago. Is the debt forgiven? What should I do, if anything? Your kortgage debt has not been canceled or forgiven. A omrtgage loanunlike forgiven debtis still considered an obligation that you must pay. When the first-mortgage lender foreclosed on your home, the second mortgage was also foreclosed and that lender lost its security interest in the foreclosurr estate. While the second-mortgage lien was eliminated, the debt associated with the second mortgage was not.

Instead, it became unsecured debt. Then, after you stopped making payments on your second mortgage, your second mortgage lender eventually determined that the debt was uncollectible and decided to charge it off.

This usually occurs between and days from the date how to feel less tired at work your last payment. A charge off means that the lender is writing the debt off their books, but it does not mean that the lender forfeits the right to foreclosude the debt.

Even though the lender did a charge off, the debt remains legally valid. After the mortgsge off, the creditor will typically tk or sell the account to a third-party collection agency.

That agency will probably t repeated how does flector patch work and send letters to you to in an attempt to collect the debt.

There are a few different routes you can take after the lender charges off a second-mortgage and sends it to collection. Your options include:. You can make payments on the debt or pay it off in full; otherwise, the collection agency might sue you personally to recover the money.

This is generally not recommended. If the collection agency wins the lawsuit and gets a money judgment against you, it may typically collect this amount by doing such things tge garnishing your wages or levying your bank account. Also, your credit will be further damaged. Of course, if you have nothing that the collection agency can get from youyou're " judgment proof "and this financial situation will last for a long time, then it might make sense to do what happens to second mortgage after foreclosure on the first. Consider talking to a lawyer before you make this decision, though.

You might have a defense to the suit, like the statute of limitations has run out or the creditor doesn't have the oh right to sue called "standing". Filing for bankruptcy is an mortagge as well because a bankruptcy can reduce or eliminate this type of debt. Though you might be liable to pay taxes on what happens to second mortgage after foreclosure on the first forgiven amount. If you want to try to settle a debt that resulted from a charged-off second mortgage, consider talking to debt settlement attorney.

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising.

In some states, the information on this website may be forrclosure a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Meet how much does it cost to fix a sideswiped car Editors.

Issue: search. If your lender charges off your second mortgage, you still owe the debt and it can still come after you to collect on it. Question I lost my home to foreclosure about a year waht. Answer Your second-mortgage debt has not been canceled or forgiven. Understanding Charged-Off Second Mortgages When the first-mortgage lender foreclosed on your home, the second mortgage was also foreclosed and that lender lost its security interest in the real estate.

What Happens After a Charge Off? Your Options After a Charge Off There are a few different routes you can take after the lender charges off a second-mortgage and sends morttgage to collection. Your how to get rid of a cold quick and easy include: Make the Required Monthly Payments or Pay the Debt in Full You can make payments on the debt or foreclosuer it off in full; otherwise, the collection agency might sue you personally to recover the mortgaye.

File for Bankruptcy Filing for bankruptcy is an option seconc well because a bankruptcy can reduce or eliminate this type of debt. Talk to a Lawyer Start here to find foreclosure lawyers near you. Practice Area Please select Zip Code. How it Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you. Foreclosure Laws. Foreclosure: The Basics.

Foreclosure and Bankruptcy. State Foreclosure Laws. Alternatives to Foreclosure. Fighting Foreclosure in Court. Foreclosure Lawyers and Other Help. Chapter 13 Bankruptcy. Credit Repair.

How to File for Chapter 7 Bankruptcy. Related Products More. View More. How It Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you.

What are Mortgages and Judgment Liens?

Mortgage vs. Deed of Trust: the Differences There are two major difference between a mortgage and a deed of trust. The first is how many parties are involved. The second is what happens in the event that the borrower cant pay. Number of Parties Involved A mortgage has .

By Amy Loftsgordon , Attorney. Often, homeowners have more than one mortgage on their property, as well as judgment liens in some cases. For instance, suppose you took out a second mortgage, along with a first mortgage, to cover the purchase price of your home. Then, a credit card company sued you and got a judgment lien. You then fell behind in your mortgage payments and the lender started a foreclosure.

What happens to your second mortgage and the judgment lien in the foreclosure? Read on to find out. When you take out a loan to buy a home, you're usually required to sign two documents: a promissory note and a mortgage or deed of trust.

Homeowners sometimes obtain a second mortgage when purchasing their property or, in some situations, later decide to take out a home equity loan or home equity line of credit. Second-mortgage lenders and third-mortgage lenders , just like first-mortgage lenders, will often require that you sign a promissory note and a contract that pledges the property as collateral for the loan. You might have other liens on your property as well, like a judgment lien. If you're sued in court for a sum of money and lose the case, the prevailing party will be granted a judgment.

That party may then file a judgment lien, which is a lien that attaches to your real estate. Generally, the priority of a lien is determined by its recording date, although some liens, like property tax liens, have automatic superiority over essentially all prior liens.

First mortgages are, as the name suggests, typically recorded first and are in first lien position. Second mortgages, which are often recorded next, are usually in second position. Judgment liens are frequently junior to a first mortgage and possibly a second mortgage, as well as perhaps other judgment liens previously filed by other creditors.

The priority of liens establishes who gets paid first following a foreclosure sale. In this case, all creditors were paid in full and zero debt remains. The second-mortgage lender and the judgment creditor would receive nothing and their liens would be wiped out in the foreclosure. But that doesn't mean that the debt disappears. When a first-mortgage lender forecloses, people often mistakenly think this means the second mortgage and any judgment liens have been satisfied as welleven if the foreclosure sale didn't bring in enough funds to pay off the debts.

They're then surprised when the second-mortgage holder or judgment creditor seeks to have the outstanding balance on their debt paid. Following a first-mortgage foreclosure, all junior liens including a second mortgage and any junior judgment liens are extinguished and the liens are removed from the property title. While the security for the debt has been eliminated, the obligations remain in place. Remember the promissory note that you signed when you took out the second mortgage? That was your promise to pay.

So, the second-mortgage lender can sue you on that promissory note. Because second-mortgage lenders frequently receive little or nothing from a foreclosure sale, it's not surprising that they often take this route to attempt to get paid.

A judgment creditor will also lose its security interest in the property following a first-mortgage lender's foreclosure. However, while the judgment creditor's lien might have been eliminated from that particular piece of real estate, it will still attach to any other real estate that you own now or in the future.

Plus, the judgment creditor can try to collect the debt in other ways , like by freezing your bank accounts or garnishing your wages. If you're facing a foreclosure and have multiple liens on your property, consider talking to a foreclosure attorney to find out what will happen to those liens and to learn about various options in your particular circumstances.

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state.

Grow Your Legal Practice. Meet the Editors. Issue: search. Learn what happens to liens and second mortgages in a foreclosure. What are Mortgages and Judgment Liens? Here are the basics on mortgages, second mortgages, and judgment liens. Promissory Notes and Mortgages When you take out a loan to buy a home, you're usually required to sign two documents: a promissory note and a mortgage or deed of trust.

Second and Third Mortgages Homeowners sometimes obtain a second mortgage when purchasing their property or, in some situations, later decide to take out a home equity loan or home equity line of credit. Judgment Liens You might have other liens on your property as well, like a judgment lien.

Lien Priority Generally, the priority of a lien is determined by its recording date, although some liens, like property tax liens, have automatic superiority over essentially all prior liens. Priority Determines How Foreclosure Funds Are Distributed The priority of liens establishes who gets paid first following a foreclosure sale. Foreclosure Eliminates Liens, Not Debt When a first-mortgage lender forecloses, people often mistakenly think this means the second mortgage and any judgment liens have been satisfied as welleven if the foreclosure sale didn't bring in enough funds to pay off the debts.

Judgment Liens Can Attach to Other Property A judgment creditor will also lose its security interest in the property following a first-mortgage lender's foreclosure.

Getting Help If you're facing a foreclosure and have multiple liens on your property, consider talking to a foreclosure attorney to find out what will happen to those liens and to learn about various options in your particular circumstances. Talk to a Lawyer Start here to find foreclosure lawyers near you.

Practice Area Please select Zip Code. How it Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you.

Foreclosure Laws. Foreclosure: The Basics. Foreclosure and Bankruptcy. State Foreclosure Laws. Alternatives to Foreclosure. Fighting Foreclosure in Court. Foreclosure Lawyers and Other Help. Chapter 13 Bankruptcy. Credit Repair. How to File for Chapter 7 Bankruptcy. Related Products More. View More. How It Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you.



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