will I still be responsible for the 2nd and Equity loan ?

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I have 3 loans( first and second junior mortgage) own by calFFA and Equity loan own by Patelco Credit union.If my house will be foreclosed will I still be responsible for the 2nd and Equity loan ?

5 Comments
  1. Reply
    Ziggy C
    May 4, 2011 at 1:15 am

    After a house is foreclosed, it is liquidated (sold) to pay off any debts owed. The first and second mortgages, and Home Equity Loan are paid from the proceeds of the sale of the property. With the current real estate market the way it is, the sale will very likely not generate enough revenue to satisfy all of these loans. The banks do have the right to sue you to repay the shortfall.

  2. Reply
    Ryan M
    May 4, 2011 at 1:52 am

    Absolutely 100%. You don’t think that you can just walk away with that money free and clear do you??? 2nd mortgages and equity loans are always recourse loans…even in non-recourse states. Even if those loans are ultimtely forgiven, every penny that is forgiven is still taxable income to you.

  3. Reply
    David
    May 4, 2011 at 2:02 am

    When your house is foreclosed, it will be sold to pay off all the debtors. The first and second mortgages, and any equity lines of credit are paid from the proceeds of the sale of the foreclosed home.

    The monies received from the sale will be used to pay off the 1st mortgage, then the 2nd and so on in that order. Even if the money is not enough to pay off all the loans and depending on the state you live in and local foreclosure laws – you might be freed from repaying all the loans however the lenders of the unpaid debt balance can sue you for the unpaid balance. This all depends on the state you live in and its underlining laws in foreclosure.

    Please consult with your local realtor/lender/attorney to get the most accurate information.

    Have a wonderful day.

    David
    http://www.davidnewhome.com
    My Blog: http://blog.davidnewhome.com

  4. Reply
    chatsplas
    May 4, 2011 at 2:09 am

    YES.
    Your three loans are all liens on the house.

    Foreclosure proceeds will be used to pay off indebtedness to 1rst mortgage, then 2nd, then 3rs, but there probably isn’t adequate value to pay them all off. .Foreclosure of first mortgage wipes out the liens of 2nd and 3rd liens, but NOT your indebtedness.
    If the lenders decide you’re a deadbeat and uncollectible, they could write off the loans and issue you 1099C, or other 1099s, which will be treated as income when you file your tax return. Generally, you won’t receive one for your first mortgage on your residence, but will for other loans.

  5. Reply
    Kevin Williams
    May 4, 2011 at 3:01 am

    It depends on if your state allows the lender to sue you for a deficient judgment. To determine what your state allows click the link and select your state http://www.worldclassmemberservices.com/ForeclosureLaws.html

    If your state allows deficient judgments the 2nd lien holder almost always will sue you in court for any monies lost. It will be filed against you as a 1099. There are programs in place to payoff your missed payments and help with current payments if your mortgage is in default so your situation is not without solutions

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