What rights does a second mortgage holder have when the first mortgage holder forecloses the mortgage?
The second can pay off the first and assume that position. If the property has depreciated or it is otherwise easier to take the possible loss, the second lienholder allows the first to foreclose. The property is then owned by the buyer (who is usually the lender) and subsequent liens are wiped out.
That means the collateral goes away. The debt may still be owed, absent any program (such as bankruptcy) that relieves the borrower of the obligation.
Published on BankingQuestions.com 5/18/09
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The second can pay off the first and assume that position. If the property has depreciated or it is otherwise easier to take the possible loss, the second lienholder allows the first to foreclose. The property is then owned by the buyer (who is usually the lender) and subsequent liens are wiped out.