Second Mortgage Foreclosure

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Over the past decade home values continued to rise at a record pace up until 2007-08 when the entire world economy and real estate markets began to tumble. While home values were still rising millions of homeowners across the nation took advantage of the equity that they were building up in their properties by taking out a second mortgage in addition to their primary mortgage. These second mortgage loans gave these people the ability to access the equity that was present in their homes, and in essence allowed any homeowner with a significant amount equity to use their home as a virtual ATM machine.

This went on for years up until the bottom fell out of the real estate market and home values began to decline. The people who took out second mortgages were now beginning to realize that they owed more than what their home was worth, and many people simply could no longer make the payments for both their first and second mortgage. Homeowners had no other choice but to face a second mortgage foreclosure with the rational that it is probably better to pay the first mortgage when compared to the second mortgage if a choice had to be made.

In reality this is actually a smart move if you must make a decision between paying one or another, as facing a second mortgage foreclosure is a much better situation then facing a first mortgage foreclosure. Regardless, it is never good to face any kind of foreclosure, and you must know your options if you are facing a similar kind of situation. The process of foreclosure on a second mortgage is a bit different and more complex than if you simply couldn't make your payments on your first mortgage, and you must know the consequences that you will have to face if you ever cannot make the payments on your second mortgage. There are essentially two kinds of situations you are going to run into when you have a second mortgage and are having trouble making payments.

You are either going to stop making payments on your second mortgage while you are still making payments on your first mortgage, or you are going to stop making payments on both mortgages at the same time. If you stop making payments on both mortgages at the same time then you are going to be foreclosed upon and after the property is sold the proceeds of the sale will go in order of priority that each lien-holder has against the home. This means that the first mortgage and whatever taxes you owe will be paid off first, and then any remaining funds will be put towards the second mortgage. If there isn't enough capital to fully payoff the second mortgage then the holder of the second mortgage lien still has the right to collect their money from you although they have little recourse past this point.

If you can still make your payments on your first mortgage but not your second mortgage then you will still have to deal with the holder of your second mortgage. A second mortgage foreclosure rarely ever happens, and what happens more regularly involves a period of negotiation between yourself and the holder of your second mortgage so that an agreement can be reached that will require you to payback a portion of what you owed on your second mortgage in exchange for a release from the lien on your property. You shouldn't panic if you cannot make both your first and second mortgage payments, and if you are ever wondering if you should pay one or the other just remember that it is always best to pay your first mortgage before your second mortgage. By doing this you should ensure that you don't have to face a second mortgage foreclosure, and as long as you are willing to negotiate with the holder of your second mortgage you should have no trouble getting your head back above water.

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