Information about consequences of default on second mortgage - The Bills.com Blog
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Information about consequences of default on second mortgage
Question: In these rough times what happens if a person has a first and a second on their home and a spouse looses job and the new job he gets does not pay enough to pay the first and second. And they decided to continue paying the first but let the second fall behind? besides being a black mark on credit reports what can the 2nd holder do? can theyforclose on the home? The second is 100k and the first is 300k thanks in advance ..... troubled!
Answer: If you go delinquent on your second mortgage, the lender can foreclose on your house and property. The foreclosure process varies from state to state, but generally takes from 2 to 18 months. It all depends on the terms of your loan. However, normally if mortgage payments are not received within 150 days, the bank can proceed with the foreclosure process. The 2nd mortgage would be repaid after the first mortgage is paid in full. If the sale price is less than the value of the mortgages held against it, then in some states
you could still owe an unsecured balance called a deficiency balance. The good news is that this new deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt that you could conceivably enroll into a debt settlement program
In some cases, it may be impossible to make any payments at all for some time. For those who have a good record with the lender, a ?forbearance plan? will allow them to suspend payments or make reduced payments for a specified length of time. In most cases the length of the plan will not exceed 18 months and will stipulate commencement of foreclosure action if the borrower defaults on the
agreement.
Foreclosure is a serious situation that has serious repercussions. If you can, you want to avoid a foreclosure as much at all costs. Bills.com is here to help. We also offer helpful guides, foreclosure FAQs, glossary terms, and other helpful tools to help you keep your home and avoid a bank repossession.
You can find more in depth information about foreclosures on our Bills.com foreclosure page on our foreclosure information page
I hope the information provided helps you Find. Learn. Save
Best,
Bill
www.bills.com
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1. Posted by Dawn on Tuesday 5th February 2008 06:10
If I am reading this correctly. You are stating that they can foreclose on your house for not paying the 2nd mortgage even if you have continued to pay the main 1st mortgage on time every month????? Please advise, as I'm currently sitting in a similiar situation. I owe $365 on first and I have a line of credit sitting at $85k. My husband lost his job. I have been paying the first on time every month, but I'm having difficulty paying the line of credit. Any information would be helpful. Thanks, Dawn
2. Posted by Nithin on Tuesday 5th February 2008 10:38
Dawn, if you used your home as collateral to get the line of credit, then yes, they have the same recourse as the 1st mortgage holder in case of default. The 2nd mortgage company can initiate foreclosure proceedings. I would suggest that you contact them as soon as possible and try to figure out a workout plan.
3. Posted by kathy on Tuesday 20th May 2008 08:55
i have a huge mortgage of $999k and second of $300k. my business is failing and the house has been on the market for 15 months. i am current on all payments but don't know where to start. the house appraises for $1.3 but you know the market is horrible. i can continue to make the 1st but it's impossible to make the second. i am sick over this. where do i start???
4. Posted by Nithin on Tuesday 20th May 2008 16:23
Have you tried to talk to your lender about Deed in Lieu of a foreclosure? If you are current and the home is not selling, you might want to try this avenue. You cannot afford to default on your second mortgage because that could lead to a foreclosure as well. You could also try to speak to your lenders to see if they will give you a break on your payments so that you can catch up. You could also speak to them about restructuring your mortgage so as to make your payments affordable.
5. Posted by Ashley on Thursday 5th June 2008 07:04
I owe 166,000 on my first and 59,000 on my second mortgage. I am possibly going to have to file bankruptcy due to credit card debt created by my husband that I knew nothing about(community property state). Before I consider filing bankruptcy, I want to try to refinance my first mortgage out of an ARM into a fixed rate while rates are low. My present ARM is 4.375% but my ARM expires in 2 years. I do not want to be stuck with higher interest rates at that time especially if I have to file bankruptcy. I am current on my first and second but wish to only refinance my first in my name only, which my husband has agreed to, and make him responsible for the second mortgage since it is his debt. Current fixed rates are 6.125%. I do not want to do a wrap around mortgage with the first and second because my husband has agreed to let me have the house should we get a divorce and I am not sure I will be able to afford the first and second together on my own. Additionally, I will be paying off his debt. Do banks usually agree to let you refinance on your first only and not make you join your first and second together? Or, should I just ride the ARM and pray the interest rates and my credit scores are better in 2 years when the ARM expires? I am not sure what I should do. If I ride the ARM, I am planning to have the second paid off before I need to refiance the first again. I have money now to pay for closing cost as well if I need to do so. I am afraid that if I ride the ARM that the interest rates will be too high in two years for me to afford the house with the new rates, which is why I am trying to get locked in a fixed even though I will lose out on the 4.375% interest rate.
6. Posted by Bill on Thursday 5th June 2008 15:44
It is possible to refinance just the first, but it isn’t easy. Your first mortgage is the mortgage listed first with the registrar. When you refinance a first mortgage, any other home loans move up in line, so your second automatically becomes your first. In order to refinance your first as a new first, your second lender must agree to continue subordinating their claim. Some lenders refuse. If your lender refuses, your only options are refinancing both mortgages into one new loan or refinancing both mortgages separately into two new loans. Before refinancing any mortgage, carefully consider your options. Use refinancing calculators to compare costs and savings from all three options and then make the most financially beneficial decision that your lenders will permit.