What happens to a second mortgage or a home equity loan if the house goes into foreclosure?
They try to collect from the sale of the property if there is sufficient equity. They can pay off the first lien at foreclosure and take the property. If there isn't enough equity, they take the loss of the collateral. The borrower still owes the debt; there just isn't collateral any longer. The lender can sue and seek other assets. Eventually, if the debt is unpaid, it may be charged off, collection action ceases, and it can be reported to the IRS as income. There may be government rules that temporarily disallow this being counted as income. Whether that will be the case in a couple of years when this would be reported, can't be said.
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They try to collect from the sale of the property if there is sufficient equity. They can pay off the first lien at foreclosure and take the property. If there isn't enough equity, they take the loss of the 