Homeowners taking out a second mortgage might wonder second mortgages and foreclosure. This is a smart question to ponder, and there are a few scenarios. Credit yogi would like to offer a few scenarios and explain the process of lien repayment in foreclosure.
Phoenix, AZ -- (SBWIRE) -- 08/05/2013 -- Homeowners taking out a second mortgage might wonder second mortgages and foreclosure. This is a smart question to ponder, and there are a few scenarios. Credit yogi would like to offer a few scenarios and explain the process of lien repayment in foreclosure:
- Distribution of Foreclosure Funds
- Lender’s Entitlement
- Scenarios for Second Mortgage Claim
Distribution of Foreclosure Funds
When a house is auctioned, funding is distributed to an order of liens. This starts with the first mortgage but oftentimes there are additional real estate taxes that are required beforehand. Some states have other liens they require before the mortgage. The remaining funds from repayment of the first mortgage go towards the second mortgage. If there is not enough funding, then the foreclosed homeowner may be in trouble.
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The Lender is entitled by law to recover his claim to the remainder of the debt on the second mortgage. His claim is validated by the promissory note that the homeowner signed when applying for the loan. Although the lien is taken away by the auction, the obligation to satisfy the debt on this “junior” lien remains. Credit yogi would like homeowners going for second mortgages to not be surprised by collectors if this happens.
Scenarios for Second Mortgage Claim
Second mortgage foreclosure laws can go a number of ways. Second Mortgage Lenders usually have little luck retaining the remainder of their loan after the house is foreclosed and funding distributed. That is not to say they won’t do all they can. The obligation is backed by the promissory note that the lender and homeowner signed at the beginning of the mortgage. This is what solidifies the “promise” made by the homeowner to pay the loan back in full. The Lender can sue the homeowner for the difference based on this note.
With any luck, enough of the second mortgage will be paid that the lender will absolve the obligation. The lender may not be willing to shell out for court: the costs of suing and attorney fees. But experts say that lenders are usually fierce in their collection efforts.
Even though the security backing the lien is absolved in foreclosure, additional junior liens by people like judgment creditors may secure obligation by adding judgments to future real estate or property.
Credit Yogi would like to offer counsel to homeowners looking for second mortgages. With the right planning and approach, they can avoid having to foreclose on their home and go to court with their second mortgage lender. Their consumer services website is supported by a helpful team of professionals connected to lenders and lawyers across the nation. Call 866-964-9644 for a free consultation.