The simple answer is a completed foreclosure of a first mortgage wipes out second and other junior liens.  Before a foreclosure occurs It may be an opportunity to do a loan modification on first or second mortgage, changing to a lower interest rate. This is most likely if you have some equity in home, have adequate income and good payment history.

The second mortgage will always get wiped out by the first mortgage. The process in foreclosures is whatever the sales price is all the proceeds are given to the first mortgage and then whatever left is given to the second. Here are a few examples that might help explain better.

First mortgage 150,000 Second Mortgage 30,000 Foreclosure sells for 160,000. In this situation the first mortgage is paid off and 10,000 will go to the second.

Another example is 150,000 Second Mortgage 30,000 Foreclosure sells for 90,000. First mortgage gets 90,000 second gets 0.

This entry was posted on Thursday, June 4th, 2009 at 3:12 am and is filed under Foreclosure. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.