Dear Dr. Don,
My wife and I are on a first mortgage. She borrowed money against a second mortgage many years ago. I did not sign the second mortgage. She is behind in payments on the second. Can they still foreclose even though I'm not on the second?
-- M Mortgage
A mortgage is a loan secured against the value of the property. An unsecured loan wouldn't be a mortgage. If she's behind on a mortgage, it's likely the lender can foreclose on the property.
I'll admit to being a little old school on marital finances. I can understand the "your money/her money" approach. But why wouldn't you offer some assistance (if you're able to do so) to keep her current on the loan?
In most community property states, it wouldn't matter that you didn't sign the note. You're on the hook if she undertook this obligation during the marriage. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Couples in Alaska can elect community property status.
It doesn't always make sense for the second mortgage lender to foreclose because the first mortgage lender gets paid first in a foreclosure. If the home isn't worth more than the balance on the first mortgage, the second mortgage lender won't get anything in the foreclosure.
Taking a look at the deed will show you any encumbrance the mortgage lenders have on the property. In many counties in the United States, you can do this online.
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