If you have a second mortgage or a judgment lien on your home and you’re facing foreclosure, you may be wondering what would happen to them if the foreclosure were to go through. You may have heard that the only the first mortgage matters, but the truth is that even though second mortgage and lien holders lose their security interest in the property, they can still come after you for the debt if they don’t receive it at the foreclosure. Learn more about what happens with second mortgages and liens in our blog.
What happens to second mortgages and liens after a foreclosure?
After a Foreclosure: Second Mortgages and Liens
Senior vs. Junior Liens and Priority
Here, a lien refers to both liens and mortgages. Senior liens are almost always first mortgages. Junior liens are second mortgages and judgment liens, such as a lien placed on a property by a creditor due to an unpaid debt.
These distinctions are important because they determine who will get paid first when a property is foreclosed on. Senior lienholders get first priority after the foreclosure sale. Then, if there is anything leftover, the second mortgage holder will get paid, and if there’s anything leftover after that, the judgment lienholder will receive what they’re owed.
Of course, most of the time only the senior lienholder gets paid because the sale doesn’t generate the full value of what’s owed on the mortgage. This means the junior lienholders are left with nothing from the foreclosure.
Foreclosure Eliminates the Lien, But Not the Debt
After a foreclosure, the junior lienholders lose their security interest in the property, which means their lien is eliminated from the property title. But the debt owed by the property owner is not eliminated. The obligations for the debt are still there, which means that the former property owner is still liable for this debt.
What does this mean? As far as the second mortgage holder, they can sue you because you signed a promissory note. Any judgment lienholders can attach a lien to any future property you purchase. They may also try to garnish your wages or freeze your bank accounts.
How can Grays Home Solutions help you Stop Foreclosure?
Looking for an alternative method that will help you stop foreclosure? Sell your home with Grays Home Solutions. We’re a home buyer working in Frederick and throughout Maryland and the Tri-state area. What are some good things about working with us?
- We’ll make an offer no matter where your home is, what condition it’s in, or how much you owe.
- We buy within 7 days once you accept our offer. So even if your foreclosure date is coming up fast, you can still use us as a solution.
- You won’t need to do any repairs on your home.
- We may be able to pay you in cash.
Interested in learning more? Use our fast response contact form or call us at 240-347-3141. We’re a free service and we’re here to help.