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Can the lender holding the 2nd on my home force me into foreclosure?
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Many people have questions about foreclosures these days. One of the many questions I've heard recently is can the lender who holds the 2nd note on my home force me into foreclosure if I am delinquent.
The answer is yes.
A 2nd loan is also a recorded debt against your home. When borrowers take a 2nd loan they guarantee repayment of the loan and the collateral used to guarantee the loan is the property on which the loan is issued. As with any loan secured by real property if the 2nd loan becomes delinquent the lender who issued the loan will foreclose on the property in order to be repaid.
When a loan in 2nd position moves to foreclose on the property the lender in 1st position will immediately begin to protect their investment and usually will also begin foreclosure proceedings.
When the lender in 1st position is also the 2nd position lender there is a chance they will work with a borrower to protect their investment. Lenders are usually reluctant to foreclose upon a property unless all other avenues of securing the repayment have failed. For example loan modifications, refinancing of the property, deed in-lieu of foreclosure, and short sales are some of the alternatives to foreclosure.
Also keep in mind that if a property does get foreclosed upon the borrower will still be liable for the amount left over from the foreclosure. For example if a home goes into foreclosure and the money from the proceeds of the sale are not enough to pay the existing 1st mortgage the borrower will still be legally liable for the balance of the 1st mortgage as well as any 2nd loan still on the property.
If a borrower is facing foreclosure, the most important thing for them to do is contact their lender to see what options are available to them to prevent the foreclosure. Next steps to take after contacting the lender should be contacting HUD to see what options they offer to prevent foreclosure. After all other options have been exhausted; a borrower should consider contacting a mortgage modification company.
Remember a mortgage is a loan collateralized by a piece of real estate. If a borrower defaults on a 1st or 2nd mortgage the lender will move to protect its investment by foreclosing.
Want to know what points are? Want to know about 1031 exchanges? Want to know if you have to pay a real estate agents commission when you buy or sell? Want to know how mortgage brokers can offer a “no points no fee loan”? Want to know why you need title insurance? I love answering your questions about loans, real estate, and any other question you may have about the industry.
Shoot me an email with your questions and I will do my best to answer them in my column. Please send questions to america@vgrouprm.com. I’ll do my best to answer.
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