Let me see if I can't simplify this a bit for you. First, you should record your mortgage. You've seriously put your interest in the property at risk by not recording it as soon as the loan was made.

 From there, you have essentially 2 ways to protect your loan:

1. As the second you should be able to pay to bring the first current and add any payments you advance to the first to the balance of your loan. This will keep the first from foreclosing and wiping out your interest. You can then foreclose, putting you in control of the sale.
2. Alternatively you can let the first foreclose, and then protect your position by showing up to the auction and bidding up the property sufficiently to cover your loan. After the sale the trustee (or court) will repay debts in order of priority (based on order of recording which is why recording your loan is so important).

Both option require cash. The second option likely requires significantly more cash as you'll need to have enough money on hand to pay both the first and your second in cash at the sale (although the money that covers your second will be returned).

In either case you should find a law firm that acts as a foreclosure trustee to help you as there may be slight variations on the above based on the wording of your mortgage or deed of trust, and the state you are located in. Best of luck.

You never told us what lead you to a decision like this.