What can a 2nd mortgage holder do to me if I stop making payments on the2nd but I am still current on the 1st mortgage?
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What can a 2nd mortgage holder do to me if I stop making payments on the2nd but I am still current on the 1st mortgage?
We own 2 residential properties. House #1 has a 1st and 2nd mortgage. House #2 just has 1 mortgage. We are current on all mortgages right now. The value of house #1 is less than what is owed on the 1st mortgage. If we stop making payment on the 2nd mortgage to get them to negotiate a settlement, can they take house #1 and/or can they do anything to house #2? What would be the ramifications other than dinging our credit?
Asked on January 17, 2012 under Real Estate Law, California
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If you stop making payments on the second loan but remain current on the first loan where there are two mortgages on the same real property, the second can foreclose on the mortgage where you would end up losing legal title to the property. Title lost would be to the property where the security is placed. The second lender who now owns the property must keep making payments on the first loan or the second would then lose legal title to the property.
There is always the possibility that the second lender who may take legal title to the home that it has a secured loan on could possibly sue you for a deficiency judgment on the loan depending upon the amount of the foreclosure bid. If there is a judgment against you for house number two, the judgment could be recorded against house number one.
I suggest that you consult with a real estate attorney about the situation you are writing about before you stop making payments on the loan secured by one or the other parcels.
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