Could you explain why you stop paying the 2nd first?

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Submitted by Bill on Thu, 07/24/2008 - 12:26pm.

Hi. I owe $355K to 1st, $65K to 2nd, ($435K total); but am advised I can only sell my home now for $400K ($375K after brokers,etc)-- a $60K loss. I have found another place to live and it sits vacant and rents are down to $1200 per month. My mortgage totals $3300. Can you explain why you would stop paying the 2nd first thus trying to get them to foreclose first??? Why would you want to do that? Thanks, Bill

Comments:

Submitted by Sean on Fri, 09/12/2008 - 10:35pm.

Assuming you are in CA, the

Assuming you are in CA, the reason is simple: if the second forecloses they give up their right to come after you personally for any losses. If you let the 1st foreclose then the 2nd can chase you for their losses until you die or file for bankruptcy.

The loss you describe isn't that bad, you should really work hard to get a short sale done, and in doing so negotiate with the lenders the the debt it settled in full so they can't try to collect down the road.

Submitted by AKTS (not verified) on Mon, 09/22/2008 - 12:29pm.

Hi Sean, what happens if the

Hi Sean, what happens if the 2nd mortgage decides to not foreclose? Do they give up their right to collect the 2nd mort if they don't foreclose? Can they pursue you without foreclosuing? Thanks.

Submitted by Sean on Mon, 09/22/2008 - 1:23pm.

In California (and it DOES

In California (and it DOES vary by state) the 2nd gives up their right to pursue the debt further (except for things like fraud) when they foreclose. If they don't foreclose they can continue to pursue you even if a foreclosure of the 1st mortgage wipes out their secured intered in the property (with the exception of purchase money 2nds which can only collect against the property).