Can a Second Mortgage Company Foreclose On My House?

TRI Writer • February 19, 2020

tennessee and georgia bankruptcy attorneyCan a second mortgage company foreclose on your home? Unfortunately for some, the answer is yes. A second mortgage company actually can foreclose on your home, even if your first mortgage is current. Like any loan, the lender of a second mortgage has the right to take legal action if you are behind in your payments. The most obvious legal action for a lender to take is to take any property that was offered as collateral for the loan. In the case of a second mortgage, the property offered as collateral is your home.

Why Would a Second Mortgage Company Foreclose On Your Home ?

If you have a second mortgage loan in place, the lender has the right to foreclose on the house. When a loan is “secured” using collateral (in the case of a mortgage or second mortgage, the collateral used is the house) the collateral is on the line if the loan becomes past due. The lender forecloses with the intention to sell the property in order to recoup what they are owed.

Why Would a Second Mortgage Company Not Foreclose on Your Home?

When a foreclosed home is sold by a lender, there are expenses that must be paid from the proceeds. The sale of the home will come with real estate fees, taxes, etc. All associated fees from the sale of the home must be paid before any money can be paid towards mortgages. Once expenses are covered, the mortgages are paid off in priority order: first mortgage, then second, etc. Until the first mortgage balance is paid in full, the second mortgage lender receives nothing. In some cases, the second mortgage company may voluntarily choose not to foreclose on your home because there may not be enough left for them after the sale of the home.

Second Mortgage Lenders Are More Likely to Negotiate:

Due to the nature of the foreclosure process and the fact that they are less likely to get full payment, second mortgage lenders are far more likely to negotiate and work with borrowers. They may be willing to arrange a payment plan. If you are behind on your second mortgage, be sure to communicate with them about your situation. They may be able to assist you. The lender is less likely to negotiate or offer helpful options if you have a track record of late payments or poor credit history.

If you have questions about avoiding a second mortgage foreclosure or want to discuss filing bankruptcy, please don’t hesitate to get in touch. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in Chattanooga with two. You are in good hands with Kenneth C. Rannick P.C.

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