If I have a second mortgage and the first forecloses, do I still have to pay on the second?
In California, if the second was a purchase money loan (the loan was funded and recorded the same day you purchased the property and every penny of the loan was used for the purchase) then this second could not pursue collection on this loan under the purchase money rule.
If it was not a purchase money loan then the seconds secured interest in the property would be wiped out by the foreclosure of the first. While no longer be secured by the property the lender can still pursue collection of the loan. It essentially becomes an unsecured loan, like a credit card. A bankruptcy could wipe out this debt or you could contact the lender to settle the account. If you ignore this and work on rebuilding your credit, it could easily resurface once you are on the road to recovery. Many of these loans are sold to collection agencies that can be aggressive and difficult to settle with. It is better to address this sooner than later.
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