Foreclosure 2nd Mortgage



My home was foreclosed two months ago. I assume that the first
mortgage will be paid off at the foreclosure auction. We owed
considerably less than the house was worth.

How is the second mortgage handled. They do not even appear to know
that it was foreclosed on, gauging by the letters and calls we are
still receiving from them.

How will they pursue getting the money owed to them, since the first
mortgage got the house and resold it to someone else at the
foreclosure auction?

We owed $75,000 on the second mortgage. Are there laws about whether
they can still sue us for the $75,000? Are they just out of luck?

We have not filed bankruptcy yet. If the second mortgage did sue us,
we would have to file. Would bankruptcy handle that debt?




Brett Weiss

The answer depends on which state you live in. Here in MD and DC,
for example, the 2nd mortgage lender would obtain a judgment
against you for its loss, which it could enforce through
garnishment and attachment.


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The Small Print: This response is for discussion purposes only.
It isn't meant to be legal advice and you shouldn't treat it as
such. If you want legal advice, speak with a local lawyer
familiar with your state's laws who can review *all* of the facts
and the law applicable to your situation.



Daniel Glanz Sr.

If you don't mind, let me try to understand by filling in some blanks.

I believe you are saying that the holder of the first mortgage
foreclosed on its note. If that is true then the security interest of
the holder of the second mortgage would be wiped out, but they would
be entitled to the balance of the proceeds of the foreclosure sale
over and above the balance of the first mortgage up to the amount they
were owed.

Although the holder of the second mortgage would no longer have a
valid security interest in the house, they would still be owed the
balance on the mortgage and could (and probably would) sue you for
that amount.

I am surprised the holder of the second mortgage is unaware of the
foreclosure. They should have received notice of the sale so they
could protect their interest. Was their mortgage recorded?

Finally, it is not true that the first mortgage was necessarily "paid
off" by the foreclosure. Whatever was bid at the sale would have been
paid to the holder of the first mortgage. That is not necessarily the
same amount as the mortgage and costs. Although it usually is if the
value of the house exceeds the mortgage. The holder of the first
mortgage can "bid in" the amount owed them and take title to the house
if they beleive it can be resold for a quick profit.

Your state may have procedures for filing a report of the foreclosure
and the disposition of the proceeds. I know Virginia does and the
trustee who does the foreclosure must accont for all of the proceeds
of the sale.

Bankruptcy would discharge the debt owed the holder of the second

Daniel Glanz, Sr.
Attorney and Counsellor at Law
50 South Pickett Street, Suite 214
Alexandria, VA 22304-7206
Voice (703) 212-2200

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