What happen to an second mortgage or equity loan when a homebuyer runs into trouble paying the first loan and

the bank has to foreclose?
Answers:
the first lender will notify the 2nd loan - TRY to bring back a local REALTOR who specializes in short sales to give a hand you out. Will save your credit just bit.
The second mortgage or junior lien have its security interest in your home wipe out. They can still sue you for the money owed, get a judgment against you.
The first mortgage holder will enjoy notified the 2nd. The 2nd mortgage company decides whether to bid/buy the home from the 1st to retrieve their interest. If they do that then they own both loans, since they have rewarded off the 1st. Then 2nd will sell house as a foreclosure & bring back whatever they can for it. In most cases the 2nd mortgage company loses out since foreclosures sell for smaller quantity than balances many times. Source(s): mortgage business 22 years

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