 Second
mortgage holder can foreclose
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 Dear
Dr. Don,
Can a second mortgage holder foreclose on a property? Even without
the first mortgage being in arrears?
Thank you for your response,
-- Wondering Wes
 Dear
Wes,
Bad news. The second mortgage lender can foreclose on the property
even if the first mortgage is in good standing with its lender.
A second mortgage is a secured loan backed by the value of the home,
just like the first mortgage. The difference is that the first mortgage
lender is paid ahead of the second mortgage lender in the event
of a foreclosure. That's why it's called a second mortgage.
If the second mortgage lender initiates foreclosure
proceedings, the first mortgage lender may step up and buy out the
second's interest in the property. Conversely, the second could
negotiate to buy the first mortgage. As long as the home's appraised
value exceeds the combined loan balances, there's not a lot of additional
risk, and there is a real benefit, for one lender to control both
mortgages.
If you thought you were safe by keeping up with the
payments on the first mortgage while missing payments on the second,
you're not. If the second has threatened or initiated foreclosure
proceedings, you need to find a good real estate attorney that will
help you manage this process and allow you to protect or realize
the equity you have in the property.
The Bankrate feature, "Avoiding
foreclosure," explains the foreclosure process.
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