Published by Find My Way Home
A second mortgage included in bankruptcy can foreclose years after it has been discharged, and can cost you a lot of money!
As an expert in helping homeowners and homebuyers qualify for home loans after a bankruptcy, foreclosure, short sale or deed in lieu, I talk to folks all over the country every single day about the challenges of recovering from financial hardship.
A nightmare trend that I am seeing more and more often, is Zombie second mortgages rising from the past to haunt unsuspecting homeowners by starting foreclosure proceedings, and threatening your ability to stay in your home that you fought so hard to keep.
Just when you thought you were safe to start your financial life over again, and continue to live in your home without the fear of a toxic mortgage, out jumps this second lien holder, trying to get their money back by foreclosing on your home.
I Thought The Mortgage Was Discharged?
If you had a second mortgage when home values plummeted in the recent past, chances are that your home value was upside down, and there wasn’t even enough equity in the home to cover the second mortgage.
Unfortunately, many bankruptcy attorneys told homeowners that by including the mortgage in the bankruptcy that you are no longer responsible for it. That’s not exactly true. The truth is, you are not responsible for the mortgage, but the lender still has a lien against your home. If you stop making payments on your mortgage, the lender has the right to foreclose.
Many homeowners continued to pay the first mortgage, and stopped paying the second mortgage years ago
Based on this inaccurate information from the bankruptcy attorney, I speak to many homeowners that have continued to pay the first mortgage on time for years, and stopped paying on the second mortgage years ago.
During the initial fall-out of the crisis, the second mortgage couldn’t do anything because there was no equity in the home. If a second lien holder initiates a foreclosure, the first mortgage holder gets their money first, and if there’s anything left over, the second lien holder can recuperate part, or all of what’s owed to them.
Here are are, almost 10 years since the beginning of the crash, and home values have jumped back up, very close to where they were in 2006. At least that’s what happened in California, where I live.
Now that there is equity in the home, second mortgage holders are starting to pay attention to all of those loans that they haven’t received payments on since the loan was discharged through the bankruptcy. Bankruptcy law prevents the lender from coming after you for payments, but they are 100% within their rights to start foreclosure proceedings and take your home from you.
