Can I be sued on my second mortgage when my first mortgage was foreclosed on years ago?
Let’s say that you have a first mortgage.
This is also your main mortgage, and you have a second mortgage.
Then you go through some hard times, and the first mortgage forecloses on you.
You don’t have to pay off the second mortgage, and once the foreclosure happens you don’t own the property anymore.
This makes the second mortgage an unsecured debt since there’s no dirt to tie to the debt.
Naturally, the question is asked, “Can I be sued on my second mortgage if my first mortgage was foreclosed on?”
We’re seeing this more frequently nowadays.
Unfortunately, consumers are given bad advice on this.
Bankruptcy lawyers (and other lawyers) have told consumers that once the foreclosure happens the second mortgage can do nothing to you.
This is absolutely false.
Now, they have to do it the right way, and they often break the law, but they can definitely come after you for the second mortgage.
You still owe the debt.
Let’s say that I owe Wells Fargo $200,000.
On top of that, I owe Bank of America $50,000, which is my second mortgage.
Wells Fargo forecloses on me, and the foreclosure sale price is $200,000 which leaves no deficiency with my first mortgage.
Now I’m good with Wells Fargo, and I move out of that house and get on with my life.
Several years later, I get a letter, or even a lawsuit, from a debt collection agency (usually it’s not my second mortgage company because the debt has been sold to other parties) telling me that I owe this money to them.
I’m perplexed because I’ve been out of that house for years now, how could I possibly be sued?
The mortgage company will say, “You still owe the debt. The property that tied that debt to the dirt is gone now, but the debt is still there.”
As you can imagine, you have all sorts of defenses.
Can the company suing you prove that they own the debt?
We’ve seen them struggle to prove it.
What about the statute of limitations?
Has the loan been accelerated?
Instead of the loan being paid off over a set amount of time, it’s all due right now?
Once the acceleration happens, the clock starts ticking for the company to sue you.
They have 6 years to sue, but we’ve seen them sue 10 years later as well.
There are defenses you can use, so if you’re getting calls and letters about your second mortgage do not ignore them.
Talk to a lawyer who can help you.
You can reach us at 1-205-879-2447 (or you can fill out a contact form), and we will gladly take a look at your unique situation and help you figure out the best course of action.
We hope this has been helpful to you, and we look forward to chatting with you.
Thanks for reading, and have a great day!
PS — Understand that every case is different. Sometimes we have to pay them money and sometimes the whole debt is killed and they have to pay you money. Let us help you look at your options to make the best decision for you and your family.
My husband lost our house in 2016 in foreclosure with CitiMortgage, but has still paid on the second mortgage religiously since. There is still $35K outstanding on the second mortgage, and my husband – at 73 – is in failing health and with a limited income.
The second mortgage is with Ditech who is now someone else. Is there any relief available besides filing bankruptcy?