It’s not uncommon for homeowners to take out a second mortgage, also referred to as a home equity loan. With a second mortgage, a borrower can utilize the equity on his home (difference between the home’s value and the amount owed on it), to secure another mortgage. Equity loans can be used to pay for a home renovation, to buy a second home, or to pay off another large debt. While these loans can be a useful borrowing tool for homeowners, it’s important to keep in mind that the debt will still need to be repaid in the event that the first lender decides to foreclose on the home.
How Collection Changes After Foreclosure
Much like the first, the home serves as collateral for repayment of a second mortgage debt. When the home is foreclosed on by the first lender, the second lender’s right to the home, also known as a lien, is done away with. However, the outstanding debt does not go with it. The mortgage lender still holds the right to collect whatever is owed on the loan. Since it’s reasonable to believe that the borrower won’t be able to repay the second mortgage after defaulting on the first, the second lender will typically file a lawsuit in order to collect. If the lender wins, it will likely be afforded the right to garnish wages, or establish liens on additional property to broaden its ability to collect.
When a homeowner has multiple liens on his home, any one of the lenders has the right to foreclose on the property. If the foreclosing lender’s lien was filed after the second mortgage lien, the second mortgage lender’s lien remains attached to the property. That means that when the foreclosing party sells, the buyer takes on the lien, and must pay it off in order for it to be removed from the title.
If you have questions about foreclosure, especially if you have multiple liens on your home, it’s in your best interest to seek out the expertise of a Miami foreclosure attorney. The team at Graham Legal can answer any question you throw at them, so reach out today for a free consultation.