I have been watching this topic with great interest. The theory is that if the First forecloses, the Second Mortgage may?pursue?the previous owner for?deficiency. It has been suggested to pay the first and let the second foreclose to avoid that.
Hmmm… Interesting, but that raises some questions:
– If second forecloses they own property subject to the first.
– How do they liquidate that asset?
Perhaps they never foreclose, waiting for the First to default.
– They just keep adding interest and charges.?
Are there any other options for Lender?
What is the owners long term strategy? Wait for the market to improve?
This all assumes CA Property, Recourse Loans.
Thanks for your comments…
Right. In the scenario above the 2nd has two choices: let the 1st foreclose, or pay the first off. Biggest downside to you at that point is that the 2nd drags out the payoff or foreclosure of the 1st lengthing the time it affects your credit. Still seems like a better solution than leaving the second to push you to bankruptcy (unless of course you can afford to pay it).