Posted on: 17th Sep, 2008 12:30am
If you're in financial hardship and you're not paying second mortgage for 150-180 days from the due date, the lender may foreclose your property or file a lawsuit and seize your personal assets. Read through the section below and find out what happens if you stop paying second mortgage.
What happens if I stop paying second mortgage?
If you're not paying your second mortgage, and your home is upside down (combined balance on 1st and 2nd loan exceeds the home value), the lender may not file a foreclosure. That's because he'll have to pay off the first loan before he intends to retrieve the money he has invested on the 2nd loan.
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
However, even if the second lender forecloses and sells the home for less than the balance on 1st and 2nd loans, the law may not require you to pay the difference or deficiency balance provided the second mortgage is a non-recourse loan. Moreover, certain states have anti-deficiency laws which prevent one from paying the deficient amount provided the second mortgage (such as the 20% of an 80/20 loan) is used to purchase a primary residence.
However, if the second mortgage is a recourse loan, and your state doesn't follow the anti-deficiency laws, the deficiency balance needs to be paid off. In case you don't pay the deficiency or if the lender doesn't foreclose at all, here's what may happen:
- Judgment/garnishment: The lender may file a lawsuit in the local court and get a judgment order to collect the unpaid balance. He can come after your assets such as bank account funds. The lender may have your wages garnished. Wage garnishment is a legal process in which an individual's earnings are partly or wholly withheld by the employer (as per court order) for repayment of debt.
- Charge-off: The lender may issue a second mortgage charge off and assign or sell off your debt to a collection agency (CA). The agency will then try to collect the loan payments by all means. If you don't make any payment, here's what the CA can do:
- Harassing calls/letters: The collection agency is likely to harass you with repeated phone calls or payment notices/letters. They may even call you at odd hours and disturb you at your workplace, though such practices are against the Fair Debt Collection Practices Act (law which governs the practices of CAs).
- CA may file lawsuit: The CA may even sue you thereby leading you to legal hassles. They may even get a judgment order from the court and go for wage garnishment or seize your bank accounts.
However, if your second mortgage debt is well past the Statute of Limitation (SOL), the collection agency cannot file a lawsuit. Even if they threaten to sue you after the SOL is over, send a cease and desist letter stating that your debt has crossed the SOL, so they shouldn't contact you any more. Still if they harass you for payments, file a complaint with the FTC or State Attorney General.
What to do if I can't pay second loan
Once your home is sold off at a foreclosure auction, the second mortgage debt or the deficiency balance on it will be considered as an unsecured loan which you can pay off in monthly installments. In case you can't afford to pay the deficiency balance in full, you may negotiate a settlement with the lender or the collection agency to whom the lender may have assigned/sold off your debt.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
Paying your second mortgage will help you minimize the chances of getting hit with negative remarks on your credit report. You can thus avoid trashing your credit score and improve your chances of getting loans in future.
i have a 1st & 2nd mtg and i have requested a short sale. i am able to make my 1st mtg payment but i do not have the funds to make my 2nd mtg pymt. if i stop paying second mortgage what happens? can the 2nd lender foreclose on my house? and if not, what happens to the 2nd loan? if they charge off & put a lien on my house, then i will never be able to sale it because i owe more than the house it worth? any advice? also, if they charge off & put a lien on my house, can i then bk it?
? How can the second lender try to collect the dues from me when my name is not on the 2nd mortgage at all? He also all ready tried to do a loan mod with the 2nd lender and they said he can't because the 1st is fine and why not modify that one? Basic question why would two lenders allow two different people on two different loans for one house? One on the 1st and one on the 2nd.
slscoots... normally the lenders will not allow two different people to be on the mortgage. However, if both of them are on the property deed, then they may allow two different people to be on the mortgage. However, if your name is not mentioned on the second loan, then you will not be held liable for the same.
I am just like everyone else here in CA I owe 359,000 on my first loan (option arm where you can pay deferred interest) and on my 2nd I owe 60,000 (refinanced & pulled cash 3 yrs ago). I have already stopped making my payment on the 2nd loan and my first mortgage finally agreed to modify it (Us Bank purchased Downey Savings). They gave me a fix interest rate of 3% for 5 years, then it goes up every year until it reaches 5% where it caps off ( approximately in the 7th year). The balance would stay the same. My payment is 1221 per month including taxes, this is one heck of a deal but my biggest issue is that second. I guess I will ride the wave and see what happens. Do loan modification paperwork contain any verbiage that allows the lender to garnish your wages or go after your assets. I have yet to hear of any lender try to do this? I can onnly guess if the lenders do this , they will be faced with a bunch of law suits? I mean first they foreclose and when one is at their lowest paoint they try to take their wages? That is a bunch of crap the major lenders started this mess adn I will be damned if they try to take anymore money from me.
I am current on my 2nd but have been paying small amount each month on first mtg. Now First Mtg bank says pay up whats behind in 45 days or they will start foreclosure, is there any sense in still paying small amount towrds first and still paying 2nd mtg pmt.? thanks House is worth less than we owe on it now
Hi E.K.!
Welcome to forums!
If you do not pay the dues now, then the lender has all the rights to foreclose the property though you pay small amount towards your first loan. You should start negotiating with your lender and check out if he can give you a loan modification.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you do not pay the dues now, then the lender has all the rights to foreclose the property though you pay small amount towards your first loan. You should start negotiating with your lender and check out if he can give you a loan modification.
Feel free to ask if you've further queries.
Sussane
Why do the Second Mortgage lenders not refinance the loan to drop the Interest to allow to pay off the loan quicker instead of possibly just having homes foreclose and the lenders having to still pay off the 1st Loan. Currently it is at 14% and this was during a time when I was on a payment program to consolidate bills. The Bills were all payed off but it seems that unless I Pay over 1000 a month and I already pay 1200 on the first Mortgage is the only way I may even possibly get out of Debt.
Hi Guest,
If you do not have equity in your property, then you won't be able to refinance your second mortgage. That can be a reason why the lender will foreclose the property rather than allowing you to refinance the loan.
If you do not have equity in your property, then you won't be able to refinance your second mortgage. That can be a reason why the lender will foreclose the property rather than allowing you to refinance the loan.
Hi I have 2 homes. The one I want to foreclose has equity line that I borrowed for 50,000 I owe 69,000 on the house. If I foreclose can they take my primary home? I can keep paying heloc payment. Thank You
Hi everyone, I'm trying to help my parents out by solving their problem, this is their situation:
They have a 1st and 2nd mortgage. 1st is $155k and 2nd is $26k and the property/condo is probably around $80k
They have tried a loan mod by talking with the bank and they were tough on them by not coming to some sort of agreement. So they then went to a realtor to list it so they can attempt a short sale but no offers have came in.
They recently received a letter stating that there 2nd mortgage has been charged off or sold to a company who I assume is a collection company stating that if they don't receive payment in 30 days they will foreclose.
Is this a scare tactic? because how can they foreclose on the property with just the second loan....what's the benefit to them?
Does anyone know what option I can explore? would a Forensic Loan Audit be beneficial? or Deed in Leu?
Please help...thank you
They have a 1st and 2nd mortgage. 1st is $155k and 2nd is $26k and the property/condo is probably around $80k
They have tried a loan mod by talking with the bank and they were tough on them by not coming to some sort of agreement. So they then went to a realtor to list it so they can attempt a short sale but no offers have came in.
They recently received a letter stating that there 2nd mortgage has been charged off or sold to a company who I assume is a collection company stating that if they don't receive payment in 30 days they will foreclose.
Is this a scare tactic? because how can they foreclose on the property with just the second loan....what's the benefit to them?
Does anyone know what option I can explore? would a Forensic Loan Audit be beneficial? or Deed in Leu?
Please help...thank you
hi gibson,
after a foreclosure, the lender will have the rights to sue you for the deficient balance resulting from the sale of the property. if you cannot pay it off, then the lender can place a lien on your primary property.
hi ronnie,
if the second mortgage company has charged off the loan, then they do not hold your parents' mortgage account any longer. they can't foreclose the property. your parents will have to deal with the collection agency. the collection agency can sue your parents if they do not pay off the dues.
your parents can apply for a deed in lieu of foreclosure and sell off the property. they won't be liable for the deficient balance resulting from the sale of the property.
thanks
after a foreclosure, the lender will have the rights to sue you for the deficient balance resulting from the sale of the property. if you cannot pay it off, then the lender can place a lien on your primary property.
hi ronnie,
if the second mortgage company has charged off the loan, then they do not hold your parents' mortgage account any longer. they can't foreclose the property. your parents will have to deal with the collection agency. the collection agency can sue your parents if they do not pay off the dues.
your parents can apply for a deed in lieu of foreclosure and sell off the property. they won't be liable for the deficient balance resulting from the sale of the property.
thanks
Haven't paid second loan for 11 months only the first ,both with gmac.
It was an 80/20 loan for primary residence.I'm in CA, which is a non-recourse state. I was offered a 10% payoff 4 mo. ago via phone, turned out to be false,
instead they wanted 30% or $30K.Loan is $100k. I don't plan to make pymts.
House is worth $285k. My 1st loan bal. is $399k.I sent them offer of 10%payoff 1 month ago, no response.What may happened? :?:
It was an 80/20 loan for primary residence.I'm in CA, which is a non-recourse state. I was offered a 10% payoff 4 mo. ago via phone, turned out to be false,
instead they wanted 30% or $30K.Loan is $100k. I don't plan to make pymts.
House is worth $285k. My 1st loan bal. is $399k.I sent them offer of 10%payoff 1 month ago, no response.What may happened? :?:
Hi Rudy!
Welcome to forums!
As the lender has not replied to your request, I would suggest you to contact your lender and reapply for it. You can even have a word with their customer service department in order to know about the status of your request.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As the lender has not replied to your request, I would suggest you to contact your lender and reapply for it. You can even have a word with their customer service department in order to know about the status of your request.
Feel free to ask if you've further queries.
Sussane
we still can to pay 1st home mortgage, but have difficulty paying 2nd mortgage. value of house is less than total 1st and 2nd mortgage. is there a way for me to have the creditors of the 2nd mortgage to reconstruct and make it affordable by reducing the monthly payment rather than not making payment as schedule?.......thanks...mr.Confuse
My home has appraised for 725K. My first is for 800K my 2nd is $350k. I have not paid my 2nd in 7 month and have offered to get someone to buy out the loan for a small percentage of the loan (Maybe 10%). If they foreclose they will get nothing, if they sue me personally they will also get nothing because I have nothing left and my investment home has 4 loans and is also under water. what are my chances of getting them the 10% from by benifactor and getting rid of the 2nd loan?
hi edmen,
you'll have to get in touch with your second mortgage lender and apply for a loan modification. depending upon your financial situation, the lender will give you a loan modification wherein the rate and term of your mortgage payments will be changed. thus, it will become affordable for you to pay off the loan.
hi john,
both the lenders have the rights to recover their dues from you. if you want to get rid of the property, then you can apply for a deed in lieu of foreclosure with your lender. if the lender accepts it, then you won't be liable for any balance amount resulting from the first mortgage. as far as the second mortgage is concerned, you will have to contact your lender and negotiate with him so that he reduces or forgives your second mortgage dues.
you'll have to get in touch with your second mortgage lender and apply for a loan modification. depending upon your financial situation, the lender will give you a loan modification wherein the rate and term of your mortgage payments will be changed. thus, it will become affordable for you to pay off the loan.
hi john,
both the lenders have the rights to recover their dues from you. if you want to get rid of the property, then you can apply for a deed in lieu of foreclosure with your lender. if the lender accepts it, then you won't be liable for any balance amount resulting from the first mortgage. as far as the second mortgage is concerned, you will have to contact your lender and negotiate with him so that he reduces or forgives your second mortgage dues.