Second Mortgage Has Not Foreclosed After Foreclosure By Primary Lender

**jditty47** · 02-15-2008, 03:14 PM

I had a house that forclosed in Jan 2007 in California. The first mortgage forclosed fine and closed accordingly. The 2nd mortgage which I believe was a HELOC however has not. It still shows as open on my credit and doesn't seem like it will close. Shouldn't this close? I never refinanced or anything. What are my options? I don't see the sense in paying for a house that I do not have anymore and that has already ruined my credit with the forclosure. Please help - very frustrated.

**LawResearcherMissy** · 02-17-2008, 07:47 PM

The first mortgage holder foreclosed, but the second did not? Were both loans with the same lender?

**texone** · 02-26-2008, 03:21 PM

It's immaterial now. When the first foreclosed, the 2nd's position was wiped out unless the first got more than they were owed. If that happened, the first gave the 2nd whatever was left over.

Here's the kicker, it's quite possible that you'll get a 1099 next January from either or both lenders. If the first took a loss then they're well within their rights to issue a 1099 to you for the amount of that loss then forcing you to claim that money on your taxes as income and pay taxes on it. Some do, some don't. I've never been able to discern a pattern of who will and who won't though.

**seniorjudge** · 02-26-2008, 03:46 PM

Quoting texone

It's immaterial now. When the first foreclosed, the 2nd's position was wiped out unless the first got more than they were owed. If that happened, the first gave the 2nd whatever was left over.

Here's the kicker, it's quite possible that you'll get a 1099 next January from either or both lenders. If the first took a loss then they're well within their rights to issue a 1099 to you for the amount of that loss then forcing you to claim that money on your taxes as income and pay taxes on it. Some do, some don't. I've never been able to discern a pattern of who will and who won't though.

Right.

The second was mercilessly killed in the foreclosure.

**texone** · 02-26-2008, 06:01 PM

Quoting seniorjudge

Right.

The second was mercilessly killed in the foreclosure.

Honestly, some second lien holders refuse money from the first and will drive a first to foreclose. I see it happen all the time when I'm negotiating short sales. Just yesterday, as a matter of fact, I had a 2nd lien holder tell me that unless they were given $3200 for their lien (which was only an $11K lien) that they'd let the first lien holder take the property to foreclosure. I asked the negotiator if she understood that I was offering her, on behalf of the 1st lien holder, $1K for a release of their lien and that that was $1K more than they would have next Tuesday when the auction takes place if they didn't agree. She said, "Oh well, we'll take our chances.". That attitude never makes sense to me but I see it fairly often.