Moonlightballroom

If you are under threat of losing your home to a foreclosure and you have two mortgages on that home, then perhaps the best thing you can do is move to get a short sale instead of a foreclosure. A Short Sale Second Mortgage will garner far less than the true value of the property but holders of a first and second mortgage will get a piece of it because both hold a lien on the property.

If the home is foreclosed by the holder of the first mortgage, then the holder of the second mortgage gets wiped out. It gets nothing.

Of course, no lending institution will walk away from its debt. And it has remedies. If the first mortgage holder forecloses, then the holder of the second mortgage can sue the homeowner for breach of contract. Or the holder of the second mortgage, realizing that a foreclosure might be on the horizon, can reinstate the first mortgage by paying the holder of the first mortgage past due payments and delinquencies to take control of the first mortgage and then foreclose. If the holder of the second mortgage gets the property in a trustee sale, then the first mortgage still exists and is in the hands of the holder of the second mortgage and it can foreclose if there is significant equity remaining in the property.

A homeowner who has a first and second mortgage on his or her home would best be served with a short sale. That would get him or her from under a threatened foreclosure as well as a breach of contract law suit.