The Truth About Second Mortgages

Second mortgages were marketed as home equity loans, or home equity lines of credit, partly to conceal that they were liens on your house, just like the first mortgage.

I can’t tell you how many times I would ask a client, How many mortgages on your home?

To be told, just one, and we have a home equity line.

Mortgage just means debt secured by real estate.

I can remember when second mortgages were rare.

As the real estate bubble inflated through 2007, people bought homes “80-20”, 80% on the first mortgage, 20% on the second.

To help you get into that house you could not actually afford?

No!

Because the first mortgage had a 20% equity cushion, it could be marketed easier, and carry a lower interest rate.

Too many of my clients let the bank figure out how much house they could afford.

Hey, if I could not afford to pay it back, why would they lend it to me.

So, the truth about most second mortgages is:  they were a bad idea to begin with, gone sour.

Now that the bubble has popped, and lenders have gone back to having some standards, the housing market is in a prolonged slump.

Michigan, like most states, puts unpaid property taxes, and other government debts, like water bills, as first liens on a home.

They have to be paid even ahead of the first mortgage.

However, if a second mortgage wants to foreclose and take your house back, they have to pay off that first mortgage.

This is a tall order these days, with so many homes worth less than what is owed on them.

So, second mortgage company foreclosures are rare.

It is more likely that they will just sue you on the note.

In states where this is allowed, like Michigan, mortgage companies are not limited to the remedy of foreclosure, they can just sue you for the money, if you default.

And, if you file Chapter 7 bankruptcy, you can discharge your liability to pay the note, but, that second mortgage remains as a lien on your home.

The Truth About Second Mortgages

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8 Responses to The Truth About Second Mortgages

  1. Mr. O’KEEFE :
    Very good blog !! I am especially interested in the 2nd mortgage topic. My husband took out a HELOC in 2006 – I did not qualify , so they used all HIS info & it was given to him . But they said I had to
    sign , even though it was HIS loan , because my name IS one the 1st mortgage.

    July 6,2007, my husband died of a self inflicted gun shot wound – suicide .

    GMAC “SOLD” the 2nd mortgage to a company called Specialized Loan Services ,(“SLS”) in 2009, but GMAC service , still, the 1st mortgage. When I tried to speak to “SLS” in 2009 , they said they could not talk to me – I WAS NOT ON THE LOAN !! BUT, they noticed payments were being “voluntarily” made for 4 years . I was doing what mechanically came to me , after witnessing my husband’s death as a result of suicide. They said “I DO NOT OWE THE LOAN , BUT IF I WANTED TO CONTINUE PAYMENTS THAT WOULD BE FINE ” , they even sent me 2 letters stating , “YOU DO NOT OWE THE LOAN , BUT IF YOU DON’T PAY IT – IT COULD OVER TIME AFFECT YOUR HOME” . NOW ~ THEY, “SLS”, is threatening to FORECLOSE on my home !! My 1st mortgage is CURRENT , never late , taxes are
    current , never late, etc.,etc.

    I’m in a catch 22 situation !! I don’t owe the loan – but the say they are going to foreclose !! AS a 63 year old widow, under the circumstances , in which he died , and being on a fixed income ( VERY fixed ) , no income , living on his & my S.S. , but managing to “JUST MAKE IT ” !!

    CAN , they do this ?? I STOPPED paying this in May, 2011 – after they said – “it isn’t your loan”. NOW, the threats have started.
    Sincerely ,
    Loretta

  2. my second mortagage co filed ins. claim for fraud title cloudy property reported stolen by owner rep. 3/08. 6/08 detroit law dept assign case by authority of city council k. cockrell j. terry request nez cert issued by state be revoked (only by city council) and return tax money paid and property roll for assessment be adjusted
    attorney adjusted roll much more to follow we have 2 trillion dollar law suit approved please settle claim j. terry is not an attorney con. j. terry 313 433-2370 or 313 332- 0662

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