If you default on your second mortgage payments, you risk losing your home. Other than this, expect calls from your lender day and night and a possible lawsuit. With the help of Oklahoma City bankruptcy lawyers, you could halt all these negative consequences from happening to you.
Your home is the collateral for that loan if you have a second mortgage. And so, the lender can foreclose. But these ramifications depend on the value of your home in relation to your first mortgage or primary mortgage (which is more superior to the second mortgage in terms of priority)
What Will Happen If I Default On My Second Mortgage?
The lender can decide to foreclose whether a mortgage is a first or second mortgage. It is more likely the lender will begin foreclosure proceedings if you default on your first mortgage.
But in a second mortgage, this will depend on the current value of your home.
What Happens If the Home Has a Higher Value?
If your second mortgage home is valued higher than the amount you owe in your first mortgage, then the lender will likely pursue foreclosure. This is because the second mortgage is partially covered, and they can partially or fully recover the money you owe. So if the lender believes they’ll get more money if they initiate a foreclosure sale, they’ll likely go for that option.
What If the Homes Are Underwater?
Most people who default on their mortgage payments are often “underwater.” Underwater means the home is valued less than what is owed on the first mortgage. This also means that your second mortgage is unsecured. It is improbable in such a scenario for a lender to start foreclosure because that would be a straightforward way for them to lose money. So they may consider other means of collecting from you.
Can A Lender Force Foreclosure?
This secondary lender can try to force you into foreclosure by buying your first mortgage, even if it’s in good standing. That way, they can force a foreclosure and recover the asset after purchasing your first mortgage outright. This will lead to liquidating your asset, but you can prevent it with the help of an Oklahoma City second mortgage attorney.
Can The Lender Accrue My Interest?
If the lender cannot foreclose and you haven’t agreed on a settlement plan, your interest will keep on accruing silently. When you sell the home, the lender will collect the money owed plus the total accrued interest because of an existing second lien on the property.
This can cost you, especially if the housing market experiences a recovery and the value of property rises. Besides, the existence of the accruing second lien will eat away your equity. To avoid this, take action today and talk to an experienced Oklahoma City second mortgage attorney who can prevent such consequences.
Can Defaulting My Second Mortgage Impact My Credit?
Many borrowers’ credit scores take a hit when they are late on their mortgage payments. Lenders report any late payment to the respective credit bureaus and will appear as a negative indicator on your report. You may continue to receive notices concerning your due payments 30, 60, or 90 days. If your debt is forwarded to collection agencies, your credit scores are even more hurt.
One strategy to use is bankruptcy. Yes, your chances of buying again may be affected. However, your credit score isn’t hurt. On your report, the second mortgage will only show bankruptcy and won’t show any late payments after it. Therefore, you shouldn’t wait to file for bankruptcy; the earlier, the better your credit scores will be. Your Oklahoma City second mortgage attorney can help you evaluate your needs and advise you accordingly.
Should I Expect a Lawsuit from Second Mortgage Lenders If I Default?
If you default on your second mortgage and it’s evident the lender can’t foreclose, you may be faced with a personal lawsuit to get a money judgment against you. This happens typically after the first mortgage lender forecloses and the second mortgage lender didn’t receive enough to pay back what you still owe.
The second mortgage lender might pursue a deficiency judgment against you to recover the remaining amount you still owe them. But this may not happen if you have power of sale mortgage, you elect against this deficiency judgment, and the property is your homestead.
How Do I Avoid Foreclosure or A Personal Lawsuit Against Me?
You can choose to settle the debt through an agreed lump sum payment that is less than you owe. But this option is only viable if you’re underwater. You may also choose to work out a loan modification with the help of an Oklahoma City loan modification attorney.
You may also consider requesting for a short sale if you’re underwater and behind in payments to avoid foreclosure and resolve the delinquency in your second mortgage.
Can Bankruptcy Help in Such a Situation?
Bankruptcy can protect you from both mortgages. When you file for bankruptcy, it may eliminate or reduce the debt. You need to discuss this option with an experienced bankruptcy attorney in Oklahoma City for more detailed legal advice.
Get Help from Skilled and Professional Attorneys in OKC
If you are already in default on your second mortgage, you need to take swift action to protect yourself. Depending on your particular situation, a lender will take certain actions against you to recover their money. You shouldn’t lose your home to the mortgage company until you’ve exhausted all available options.
An experienced financial relief attorney can help you get the answers to your questions and help you learn about the different options that could work for you. Our law firm is committed to helping you achieve financial freedom through various strategies. Book a FREE case evaluation, and we will help you through this season.