Purchased home in 2005 in Michigan with a 1st and 2nd mortgage with same lender. Modified the home became delinquent again modified. now 1st is current and 2nd has been charged off. was offered a settlement but did not have cash on hand. what should we be worried about. can second foreclose 1st is 182,000 2nd 30,000
Can second mortgage foreclose?
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The short answer is yes the 2nd mortgage has the right to foreclose. But in reality it is very doubtful they ever would. If they were to foreclose they would be responsible for all foreclosure costs, and all costs associated with maintaining the property (taxes, heat, etc) while they try to sell it. Once they got it sold they would be required to clear out the first mortgage at $182k, and then they would be entitled only to what is left. Unless you have a substantial amount of equity in the property it would be an exercise of futility for them to foreclose, in fact, they would probably lose far more than they would ever stand to gain. They may threaten foreclosure and make it sound as if it’s imminent, that’s common. Following through with it is another thing altogether.
If they’re already offering you a settlement than that’s a good thing and this would be the route I would suggest that you look into. I have helped many homeowners settle their 2nd mortgages over the past couple years and settlements can be shockingly low, sometimes in the 5-20% range. In your case with a $30k balance I would look to settle this somewhere between $2k and $6k, and not a penny higher. Play hard ball, let them know that’s all you have and eventually you’ll get it done.
I would suggest you start setting money aside whenever you can to build a settlement reserve to be used for this purpose. It may take a while to get to a point where you have enough to make the deal but you should have time.
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Andy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.
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