What happens if I default on my second mortgage?

If, on the other hand, you default on a second mortgage, whether that lender will initiate a foreclosure depends mainly on the current value of your home.

What happens to a second mortgage in a foreclosure?

The position of a mortgage—whether the mortgage is first, second, or even third—is important because, in the event of a foreclosure, the proceeds of the foreclosure first go to repaying the most senior lender (the first mortgage holder), then to all other lenders in order of seniority.

When does a second mortgage become uncollectible?

Instead, it became unsecured debt. Then, after you stopped making payments on your second mortgage, your second mortgage lender eventually determined that the debt was uncollectible and decided to charge it off. This usually occurs between 180 and 240 days from the date of your last payment.

Which is an example of a second mortgage?

A few common examples of second mortgages are home equity loans and home equity lines of credit (HELOCs). A senior lien, such as a first mortgage, takes priority over a junior lien, such as a second mortgage. Priority determines which lender gets paid before other lenders after a foreclosure sale.

What happens if you default on your mortgage in California?

Most of the time, California law prohibits lenders from pursuing a deficiency judgment against a defaulting mortgage borrower. A deficiency judgment is the difference between the outstanding mortgage and the amount the home sells for in foreclosure.

When does a second mortgage lead to foreclosure?

A second mortgage can sometimes lead to foreclosure when a homeowner defaults on their loans. The lender for the second mortgage can purchase the primary mortgage and then foreclose, which means the homeowner loses their home to the second mortgage lender.

When does a second mortgage take priority over the first?

Generally, the date a mortgage is recorded in the county property records determines lien priority. An old common law principle explains this idea simply: “first in time, first in right.” A second mortgage is a junior lien, which means the first mortgage, or senior lien, takes priority if there is a foreclosure sale.