What Happens If First Forecloses And The Holder Of Second Pays Off First?

Fred

LoanSafe Member
Aug 27, 2014
24
0
1
46
Home Value 245,000

Live in California

First = 124,000, 13 1/2 years left on a 15 year mortgage. Non Recourse. Mortgage is Current
First installment of property taxes

Second is a HELOC = 158,000 principal, plus $26,000 in payments not made for the past 20 months.(approx 14,000 is principal and 12,000 is interest and late fees. Recourse

We have been paying first because we can afford to do so and not paying second because we cannot afford.

Second and first are the same bank. The second calls periodically and leaves us a message to call them. I answered one time and no one was on the line, the recorded call just continued.

What would happen if we did not pay the monthly due on the first and the first decided to foreclose?

If the second paid the first off at the foreclosure, and took possession, then sold the house. there would be a shortfall of at least $50,000.

Since this is a recourse loan, what is the likely action the second will take against me to collect the debt?

Thanks in advance
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,851
466
1,000
49
Southern California
www.loansafe.org
Hi Fred,

It is highly probable that your HELOC will eventually foreclose on you in the near future. The same can be said about the first if you stop paying. If it is the same lender, they don't care if they foreclose from 2nd or 1st position since they are paying off themselves.

I would also say that the 2nd would come after you at some time in the future as well since it is a recourse loan.
 

Fred

LoanSafe Member
Aug 27, 2014
24
0
1
46
Hi Fred,

It is highly probable that your HELOC will eventually foreclose on you in the near future. The same can be said about the first if you stop paying. If it is the same lender, they don't care if they foreclose from 2nd or 1st position since they are paying off themselves.

I would also say that the 2nd would come after you at some time in the future as well since it is a recourse loan.
Thanks for the reply, You stated "2nd would come after you at some time in the future as well" What does come after you entail?

Judgement, Payroll garnish, Law suit?.............................
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,851
466
1,000
49
Southern California
www.loansafe.org
You are most welcome.

They would start by selling it to a debt collector who will then contact you to try and reach a settlement or payment plan. If they cannot work out anything with you or you ignore them, they may then file a lawsuit to obtain a judgement. Once they have a judgement they may be able to garnish your wages. At that time, you can either pay it, claim insolvency or file for bankruptcy.
 

Fred

LoanSafe Member
Aug 27, 2014
24
0
1
46
Thanks Maurice. I am not in a good position. At the end of the day, does it make a difference if the first(non-recourse) starts foreclosure or the second starts foreclosure(recourse). Am I in a better position if the first starts the foreclosure or the second starts foreclosure?
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
Aug 10, 2007
26,851
466
1,000
49
Southern California
www.loansafe.org
My pleasure Fred.

It really makes no difference because either way, the second mortgage is owned by the same lender and will suffer losses on the mortgage they extended to you. But please keep in mind that if they go after you and you have no extra income for them to take and or garnish, you can claim bankruptcy and or insolvency.

What this means is that your income barely covers 'normal living" expenses and if you can prove this, then you will not have to pay because you can't and if you did, you would be homeless and starving. We have laws that protect you if this is the case.